CUNA Comment Letter

Proposed Amendments to Regulations B, E, M, Z, DD Regarding Electronic Delivery of Disclosures

November 12, 1999

Ms. Jennifer J. Johnson
Secretary
Board of Governors of the
Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551

Re: Docket No. R-1043, Proposed Amendments to Regulation Z Regarding Electronic Delivery of Disclosures

Dear Ms. Johnson:

The Credit Union National Association (CUNA) appreciates the opportunity to comment on the proposed amendments to Regulation Z, which implements the Truth in Lending Act. The proposal, which appeared in the Federal Register on September 14, 1999, would permit lenders to use electronic communications to provide the disclosures required by Regulation Z if the borrower agrees to such delivery. CUNA represents more than 90 percent of our nation's 11,000 state and federal credit unions.

In March 1998, the Federal Reserve Board (Board) issued a proposed rule to permit lenders to use electronic communications to provide the disclosures required under Regulation Z. In our comment letter to the Board, CUNA supported the proposal to allow lenders to provide the required disclosures electronically. Because credit unions are owned and operated by their members, they want to provide the most efficient services for their members and providing disclosures electronically would help credit unions reach this goal.

In response to the comments received to the proposal issued in March 1998, the Board decided to issue the current proposed rule. These revised rules include the information that would have to be given to borrowers and would require that borrowers affirmatively indicate their consent. The proposed rules contain model forms for providing this information. These rules also provide lenders with the option of delivering the disclosures to an e-mail address designated by the borrower or making the disclosures available at another location, such as the lender's website.

Again, CUNA supports the proposal to allow lenders to provide disclosures electronically. This is critical in order for credit unions to expand electronic service delivery methods. Because consumers are becoming increasingly comfortable with obtaining retail, financial, and other services electronically, we believe that all pertinent regulations should be revised to allow for the electronic delivery of all types of communications and services.

In the current proposal, the Board requested comment on a number of specific issues. CUNA's comments on these issues are as follows:

Verification by return receipt that a borrower has received the electronic disclosures.

The Board has requested comment on whether the electronic disclosure rules should include a requirement that lenders must verify, by return receipt, that a borrower has received the electronic disclosures.

Although some credit unions may want to provide such verification, we do not believe that it should be mandated. Similar verifications are not required for paper-based disclosures. For example, lenders are not currently required to verify that a borrower went to the mailbox to retrieve a paper disclosure. Such a requirement would be costly, burdensome and not necessary if additional copies are readily available in paper or electronic form.

Changes or additions to the Standardized Disclosures for obtaining borrowers' consent for electronic disclosures.

We believe the forms may be confusing to some borrowers and could be shortened without sacrificing the necessary information. For example, the forms could include only a description of the disclosures and a place for the borrower to check either electronic or paper disclosure. It is also not necessary to give borrowers the option of selecting a paper format since lenders will have to provide paper disclosures unless the borrower opts to receive the information electronically.

The forms request information regarding the specifications of the consumer's computer. We do not believe that it is necessary to specify the hardware and technical requirements necessary to receive and retain electronic disclosures. Such information may not be readily known to borrowers at the time they complete the form. We favor a less restrictive approach that allows lenders the ability to develop easier methods to help borrowers determine if they have the hardware and technical capability to receive and retain the electronic disclosures. An example may be that a lender could provide a borrower with an "on-line" test to determine if the borrower has the necessary capability. This could be as simple as instructing the borrower to click a button on their computer to determine if they can receive the disclosures.

Many credit unions may choose to provide additional information to their members in a brochure. We urge the Board to allow credit unions the option of providing a brochure, as opposed to requiring that such information be included in the model forms.

We believe lenders should have the option of providing some additional brief information. Lenders should be permitted to add information to tell the consumer what would happen if the lender were to receive a returned, unopened e-mail. Lenders should also be permitted to add a statement that requests the consumer to keep the lender advised of all postal/e-mail address changes and telephone number changes.

Another suggestion for simplification purposes would be to allow lenders to use a combined disclosure for the Board's regulations that permit electronic disclosures. For example, one disclosure form for Regulations B, E, M, Z, and DD could be used with a check-off box for each regulation where electronic disclosures will be permitted.

We also noticed that the model forms imply that electronic addresses end in ".com." This should be left blank so that other commonly used extensions such as ".org," ".net," or ".mil" may also be used. More such address extensions are inevitable as technology advances.

The 15-day notice requirement regarding changes to the information provided in the Standardized Disclosure.

We believe that 15 days is an appropriate time period for notifying a borrower of a change in terms to their agreement to receive disclosures electronically, especially if there is no mail delay. We recommend that this time period be incorporated into Regulation Z, as opposed to stating this in the staff commentary. We also suggest that there be an exception that allows for no prior notice if a change must be made immediately for security reasons. This exception may be necessary if, for example, hackers violate a website.

The requirement to obtain the borrower's consent before providing electronic disclosures other than those described at the time consent was first obtained.

Many credit unions will prefer to supply an initial list of potential disclosures at the time consent is first obtained, as opposed to obtaining the consent for each new disclosure. This will reduce printing and mailing costs for the credit union and should be less confusing for the members. Because credit unions are member-owned, not-for-profit cooperatives, the savings realized as a result of the reduced costs can be returned to the members either in the form of lower interest rates on loans or higher dividends paid on member accounts. Some credit unions may prefer to require consent for each new disclosure. Regulation Z should allow lenders to choose the option that is best for them.

In a further effort to reduce costs and burden for credit unions, we suggest that Regulation Z only require lenders to inform borrowers that future disclosures may be delivered electronically and that the lender retains the right to send disclosures to postal mailing addresses if necessary. Just as lenders are not required to provide a list of potential disclosures that might be mailed in the future to a postal address, they should not be required to provide a detailed list of disclosures that might be delivered in the future to an electronic address or location. A detailed list of potential disclosures at the time of consent may be confusing for some borrowers. Also, new disclosures may be added over time and having to revise the list constantly will become an additional burden for credit unions. Lenders should also have the flexibility to use other communications tools, such as registered mail, wire messages, and facsimiles, depending on the particular circumstances.

The burden of a 90-day minimum time period for maintaining disclosure information on a lender's website.

The costs to credit unions for maintaining disclosure information for a minimum of 90 days are far less expensive than mailing disclosures to the members. Many credit unions have no problem with this requirement and some may prefer to maintain this information for longer periods of time, which may be helpful if there is future litigation.

However, electronic storage space costs money and some credit unions may have to purchase additional capacity to store disclosures electronically. To limit storage costs, lenders should be allowed to give borrowers the option of deleting their disclosures from a lender's website prior to the end of the 90-day posting period once they have viewed and retained the disclosures to their satisfaction. Again, because credit unions are member-owned, not-for-profit cooperatives, the savings realized as a result of the reduced costs can be returned to the members either in the form of lower interest rates on loans or higher dividends paid on member accounts. Credit union members will appreciate this opportunity to reduce costs and this will be comparable to receiving the disclosures at an e-mail address where the member has the ability to delete the e-mail.

The feasibility to: 1) provide disclosures in a format that cannot be altered without detection; 2) have systems in place capable of detecting whether or not the information has been altered; and 3) to use independent certification authorities to verify electronic documents.

All credit unions with a secure website will want to do everything possible to ensure that the disclosures cannot be altered in order to protect both the credit union and the members. Although it may be feasible, it is unreasonable to expect all credit unions to guarantee that the disclosures could not be altered without detection. Even if they could do so today, technology is continuously and rapidly changing and future software programs may be developed that will allow users to modify various types of documents. A requirement to provide anything other than "reasonable precautions" against alterations would likely be cost prohibitive.

We do not support any approach that would require lenders to hire independent certification authorities to verify electronic documents. Independent certification authorities could be costly and each credit union must analyze the costs to determine if that is the approach they want to take. Moreover, technology may develop that will provide more efficient verification technologies. The Board should permit financial institutions and the market decide which strategy is best.

Thank you for the opportunity to comment on the proposed amendments to Regulation Z. If you or other Board staff have questions about our comments, please give me a call at (202) 218-7795.

Sincerely

Jeffrey Bloch
Assistant General Counsel


November 12, 1999

Ms. Jennifer J. Johnson
Secretary
Board of Governors of the
Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551

Re: Docket No. R-1044, Proposed Amendments to Regulation DD Regarding Electronic Delivery of Disclosures

Dear Ms. Johnson:

The Credit Union National Association (CUNA) appreciates the opportunity to comment on the proposed amendments to Regulation DD, which implements the Truth in Savings Act. The proposal, which appeared in the Federal Register on September 14, 1999, would permit financial institutions to use electronic communications to provide the disclosures required by Regulation DD if the consumer agrees to such delivery. The Truth in Savings Act requires the National Credit Union Administration Board to adopt regulations that are substantially similar to those of the Federal Reserve Board (Board), taking into account the unique nature of credit unions and the limitations under which they may pay dividends on member accounts. CUNA represents more than 90 percent of our nation's 11,000 state and federal credit unions.

In March 1998, the Board issued a proposed rule to permit financial institutions to use electronic communications to provide the disclosures required under Regulation DD. In our comment letter to the Board, CUNA supported the proposal to allow financial institutions to provide the required disclosures electronically. Because credit unions are owned and operated by their members, they want to provide the most efficient services for their members and providing disclosures electronically would help credit unions reach this goal.

In response to the comments received to the proposal issued in March 1998, the Board decided to issue the current proposed rule. These revised rules include the information that would have to be given to consumers and would require that consumers affirmatively indicate their consent. The proposed rules contain model forms for providing this information. These rules also provide financial institutions with the option of delivering the disclosures to an e-mail address designated by the consumer or making the disclosures available at another location, such as the financial institution's website.

Again, CUNA supports the proposal to allow financial institutions to provide disclosures electronically. This is critical in order for credit unions to expand electronic service delivery methods. Because consumers are becoming increasingly comfortable with obtaining retail, financial, and other services electronically, we believe that all pertinent regulations should be revised to allow for the electronic delivery of all types of communications and services.

In the current proposal, the Board requested comment on a number of specific issues. CUNA's comments on these issues are as follows:

Verification by return receipt that a consumer has received the electronic disclosures.

The Board has requested comment on whether the electronic disclosure rules should include a requirement that financial institutions must verify, by return receipt, that a consumer has received the electronic disclosures.

Although some credit unions may want to provide such verification, we do not believe that it should be mandated. Similar verifications are not required for paper-based disclosures. For example, financial institutions are not currently required to verify that a consumer went to the mailbox to retrieve a paper disclosure. Such a requirement would be costly, burdensome and not necessary if additional copies are readily available in paper or electronic form.

Changes or additions to the Standardized Disclosures for obtaining consumers' consent for electronic disclosures.

We believe the forms may be confusing to some consumers and could be shortened without sacrificing the necessary information. For example, the forms could include only a description of the disclosures and a place for the consumer to check either electronic or paper disclosure. It is also not necessary to give consumers the option of selecting a paper format since financial institutions will have to provide paper disclosures unless the consumer opts to receive the information electronically.

The forms request information regarding the specifications of the consumer's computer. We do not believe that it is necessary to specify the hardware and technical requirements necessary to receive and retain electronic disclosures. Such information may not be readily known to consumers at the time they complete the form. We favor a less restrictive approach that allows financial institutions the ability to develop easier methods to help consumers determine if they have the hardware and technical capability to receive and retain the electronic disclosures. An example may be that a financial institution could provide a consumer with an "on-line" test to determine if the consumer has the necessary capability. This could be as simple as instructing the consumer to click a button on their computer to determine if they can receive the disclosures.

Many credit unions may choose to provide additional information to their members in a brochure. We urge the Board to allow credit unions the option of providing a brochure, as opposed to requiring that such information be included in the model forms.

We believe financial institutions should have the option of providing some additional brief information. Financial institutions should be permitted to add information to tell the consumer what would happen if the institution were to receive a returned, unopened e-mail. Financial institutions should also be permitted to add a statement that requests the consumer to keep the institution advised of all postal/e-mail address changes and telephone number changes.

Another suggestion for simplification purposes would be to allow financial institutions to use a combined disclosure for the Board's regulations that permit electronic disclosures. For example, one disclosure form for Regulations B, E, M, Z, and DD could be used with a check-off box for each regulation where electronic disclosures will be permitted.

We also noticed that the model forms imply that electronic addresses end in ".com." This should be left blank so that other commonly used extensions such as ".org," ".net," or ".mil" may also be used. More such address extensions are inevitable as technology advances.

The 15-day notice requirement regarding changes to the information provided in the Standardized Disclosure.

We believe that 15 days is an appropriate time period for notifying a consumer of a change in terms to their agreement to receive disclosures electronically, especially if there is no mail delay. We recommend that this time period be incorporated into Regulation DD, as opposed to stating this in the staff commentary. We also suggest that there be an exception that allows for no prior notice if a change must be made immediately for security reasons. This exception may be necessary if, for example, hackers violate a website.

The requirement to obtain the consumer's consent before providing electronic disclosures other than those described at the time consent was first obtained.

Many credit unions will prefer to supply an initial list of potential disclosures at the time consent is first obtained, as opposed to obtaining the consent for each new disclosure. This will reduce printing and mailing costs for the credit union and should be less confusing for the members. Because credit unions are member-owned, not-for-profit cooperatives, the savings realized as a result of the reduced costs can be returned to the members either in the form of lower interest rates on loans or higher dividends paid on member accounts. Some credit unions may prefer to require consent for each new disclosure. Regulation DD should allow financial institutions to choose the option that is best for them.

In a further effort to reduce costs and burden for credit unions, we suggest that Regulation DD only require financial institutions to inform consumers that future disclosures may be delivered electronically and that the financial institution retains the right to send disclosures to postal mailing addresses if necessary. Just as financial institutions are not required to provide a list of potential disclosures that might be mailed in the future to a postal address, they should not be required to provide a detailed list of disclosures that might be delivered in the future to an electronic address or location. A detailed list of potential disclosures at the time of consent may be confusing for some consumers. Also, new disclosures may be added over time and having to revise the list constantly will become an additional burden for credit unions. Financial institutions should also have the flexibility to use other communications tools, such as registered mail, wire messages, and facsimiles, depending on the particular circumstances.

The burden of a 90-day minimum time period for maintaining disclosure information on a financial institution's website.

The costs to credit unions for maintaining disclosure information for a minimum of 90 days are far less expensive than mailing disclosures to the members. Many credit unions have no problem with this requirement and some may prefer to maintain this information for longer periods of time, which may be helpful if there is future litigation.

However, electronic storage space costs money and some credit unions may have to purchase additional capacity to store disclosures electronically. To limit storage costs, financial institutions should be allowed to give consumers the option of deleting their disclosures from a financial institution's website prior to the end of the 90-day posting period once they have viewed and retained the disclosures to their satisfaction. Again, because credit unions are member-owned, not-for-profit cooperatives, the savings realized as a result of the reduced costs can be returned to the members either in the form of lower interest rates on loans or higher dividends paid on member accounts. Credit union members will appreciate this opportunity to reduce costs and this will be comparable to receiving the disclosures at an e-mail address where the member has the ability to delete the e-mail.

The feasibility to: 1) provide disclosures in a format that cannot be altered without detection; 2) have systems in place capable of detecting whether or not the information has been altered; and 3) to use independent certification authorities to verify electronic documents.

All credit unions with a secure website will want to do everything possible to ensure that the disclosures cannot be altered in order to protect both the credit union and the members. Although it may be feasible, it is unreasonable to expect all credit unions to guarantee that the disclosures could not be altered without detection. Even if they could do so today, technology is continuously and rapidly changing and future software programs may be developed that will allow users to modify various types of documents. A requirement to provide anything other than "reasonable precautions" against alterations would likely be cost prohibitive.

We do not support any approach that would require financial institutions to hire independent certification authorities to verify electronic documents. Independent certification authorities could be costly and each credit union must analyze the costs to determine if that is the approach they want to take. Moreover, technology may develop that will provide more efficient verification technologies. The Board should permit financial institutions and the market decide which strategy is best.

Thank you for the opportunity to comment on the proposed amendments to Regulation DD. If you or other Board staff have questions about our comments, please give me a call at (202) 218-7795.

Sincerely

Jeffrey Bloch
Assistant General Counsel


November 12, 1999

Ms. Jennifer J. Johnson

Secretary
Board of Governors of the
Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551

Re: Docket No. R-1041, Proposed Amendments to Regulation E Regarding Electronic Delivery of Disclosures

Dear Ms. Johnson:

The Credit Union National Association (CUNA) appreciates the opportunity to comment on the proposed amendments to Regulation E, which implements the Electronic Fund Transfer Act. The proposal, which appeared in the Federal Register on September 14, 1999, would permit financial institutions to use electronic communications to provide the disclosures required by Regulation E if the consumer agrees to such delivery. CUNA represents more than 90 percent of our nation's 11,000 state and federal credit unions.

In March 1998, the Federal Reserve Board (Board) issued an interim rule to permit financial institutions to use electronic communications to provide the disclosures required under Regulation E. In our comment letter to the Board, CUNA supported the rule to allow financial institutions to provide the required disclosures electronically. Because credit unions are owned and operated by their members, they want to provide the most efficient services for their members and providing disclosures electronically would help credit unions reach this goal.

In response to the comments received to the interim rule issued in March 1998, the Board decided to issue the current proposed rule. These revised rules include the information that would have to be given to consumers and would require that consumers affirmatively indicate their consent. The proposed rules contain model forms for providing this information. These rules also provide financial institutions with the option of delivering the disclosures to an e-mail address designated by the consumer or making the disclosures available at another location, such as the financial institution's website.

Again, CUNA supports the current proposal to allow financial institutions to provide disclosures electronically. This is critical in order for credit unions to expand electronic service delivery methods. Because consumers are becoming increasingly comfortable with obtaining retail, financial, and other services electronically, we believe that all pertinent regulations should be revised to allow for the electronic delivery of all types of communications and services.

In the current proposal, the Board requested comment on a number of specific issues. CUNA's comments on these issues are as follows:

Verification by return receipt that a consumer has received the electronic disclosures.

The Board has requested comment on whether the electronic disclosure rules should include a requirement that financial institutions must verify, by return receipt, that a consumer has received the electronic disclosures.

Although some credit unions may want to provide such verification, we do not believe that it should be mandated. Similar verifications are not required for paper-based disclosures. For example, financial institutions are not currently required to verify that a consumer went to the mailbox to retrieve a paper disclosure. Such a requirement would be costly, burdensome and not necessary if additional copies are readily available in paper or electronic form.

Changes or additions to the Standardized Disclosures for obtaining consumers' consent for electronic disclosures.

We believe the forms may be confusing to some consumers and could be shortened without sacrificing the necessary information. For example, the forms could include only a description of the disclosures and a place for the consumer to check either electronic or paper disclosure. It is also not necessary to give consumers the option of selecting a paper format since financial institutions will have to provide paper disclosures unless the consumer opts to receive the information electronically.

The forms request information regarding the specifications of the consumer's computer. We do not believe that it is necessary to specify the hardware and technical requirements necessary to receive and retain electronic disclosures. Such information may not be readily known to consumers at the time they complete the form. We favor a less restrictive approach that allows financial institutions the ability to develop easier methods to help consumers determine if they have the hardware and technical capability to receive and retain the electronic disclosures. An example may be that a financial institution could provide a consumer with an "on-line" test to determine if the consumer has the necessary capability. This could be as simple as instructing the consumer to click a button on their computer to determine if they can receive the disclosures.

Many credit unions may choose to provide additional information to their members in a brochure. We urge the Board to allow credit unions the option of providing a brochure, as opposed to requiring that such information be included in the model forms.

We believe financial institutions should have the option of providing some additional brief information. Financial institutions should be permitted to add information to tell the consumer what would happen if the institution were to receive a returned, unopened e-mail. Financial institutions should also be permitted to add a statement that requests the consumer to keep the institution advised of all postal/e-mail address changes and telephone number changes.

Another suggestion for simplification purposes would be to allow financial institutions to use a combined disclosure for the Board's regulations that permit electronic disclosures. For example, one disclosure form for Regulations B, E, M, Z, and DD could be used with a check-off box for each regulation where electronic disclosures will be permitted.

We also noticed that the model forms imply that electronic addresses end in ".com." This should be left blank so that other commonly used extensions such as ".org," ".net," or ".mil" may also be used. More such address extensions are inevitable as technology advances.

The 15-day notice requirement regarding changes to the information provided in the Standardized Disclosure.

We believe that 15 days is an appropriate time period for notifying a consumer of a change in terms to their agreement to receive disclosures electronically, especially if there is no mail delay. We recommend that this time period be incorporated into Regulation E, as opposed to stating this in the staff commentary. We also suggest that there be an exception that allows for no prior notice if a change must be made immediately for security reasons. This exception may be necessary if, for example, hackers violate a website.

The requirement to obtain the consumer's consent before providing electronic disclosures other than those described at the time consent was first obtained.

Many credit unions will prefer to supply an initial list of potential disclosures at the time consent is first obtained, as opposed to obtaining the consent for each new disclosure. This will reduce printing and mailing costs for the credit union and should be less confusing for the members. Because credit unions are member-owned, not-for-profit cooperatives, the savings realized as a result of the reduced costs can be returned to the members either in the form of lower interest rates on loans or higher dividends paid on member accounts. Some credit unions may prefer to require consent for each new disclosure. Regulation E should allow financial institutions to choose the option that is best for them.

In a further effort to reduce costs and burden for credit unions, we suggest that Regulation E only require financial institutions to inform consumers that future disclosures may be delivered electronically and that the financial institution retains the right to send disclosures to postal mailing addresses if necessary. Just as financial institutions are not required to provide a list of potential disclosures that might be mailed in the future to a postal address, they should not be required to provide a detailed list of disclosures that might be delivered in the future to an electronic address or location. A detailed list of potential disclosures at the time of consent may be confusing for some consumers. Also, new disclosures may be added over time and having to revise the list constantly will become an additional burden for credit unions. Financial institutions should also have the flexibility to use other communications tools, such as registered mail, wire messages, and facsimiles, depending on the particular circumstances.

The burden of a 90-day minimum time period for maintaining disclosure information on a financial institution's website.

The costs to credit unions for maintaining disclosure information for a minimum of 90 days are far less expensive than mailing disclosures to the members. Many credit unions have no problem with this requirement and some may prefer to maintain this information for longer periods of time, which may be helpful if there is future litigation.

However, electronic storage space costs money and some credit unions may have to purchase additional capacity to store disclosures electronically. To limit storage costs, financial institutions should be allowed to give consumers the option of deleting their disclosures from a financial institution's website prior to the end of the 90-day posting period once they have viewed and retained the disclosures to their satisfaction. Again, because credit unions are member-owned, not-for-profit cooperatives, the savings realized as a result of the reduced costs can be returned to the members either in the form of lower interest rates on loans or higher dividends paid on member accounts. Credit union members will appreciate this opportunity to reduce costs and this will be comparable to receiving the disclosures at an e-mail address where the member has the ability to delete the e-mail.

The feasibility to: 1) provide disclosures in a format that cannot be altered without detection; 2) have systems in place capable of detecting whether or not the information has been altered; and 3) to use independent certification authorities to verify electronic documents.

All credit unions with a secure website will want to do everything possible to ensure that the disclosures cannot be altered in order to protect both the credit union and the members. Although it may be feasible, it is unreasonable to expect all credit unions to guarantee that the disclosures could not be altered without detection. Even if they could do so today, technology is continuously and rapidly changing and future software programs may be developed that will allow users to modify various types of documents. A requirement to provide anything other than "reasonable precautions" against alterations would likely be cost prohibitive.

We do not support any approach that would require financial institutions to hire independent certification authorities to verify electronic documents. Independent certification authorities could be costly and each credit union must analyze the costs to determine if that is the approach they want to take. Moreover, technology may develop that will provide more efficient verification technologies. The Board should permit financial institutions and the market decide which strategy is best.

Thank you for the opportunity to comment on the proposed amendments to Regulation E. If you or other Board staff have questions about our comments, please give me a call at (202) 218-7795.

Sincerely

Jeffrey Bloch
Assistant General Counsel


November 12, 1999

Ms. Jennifer J. Johnson
Secretary
Board of Governors of the
Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551

Re: Docket No. R-1042, Proposed Amendments to Regulation M Regarding Electronic Delivery of Disclosures

Dear Ms. Johnson:

The Credit Union National Association (CUNA) appreciates the opportunity to comment on the proposed amendments to Regulation M, which implements the Consumer Leasing Act. The proposal, which appeared in the Federal Register on September 14, 1999, would permit lessors to use electronic communications to provide the disclosures required by Regulation M if the consumer agrees to such delivery. CUNA represents more than 90 percent of our nation's 11,000 state and federal credit unions.

In March 1998, the Federal Reserve Board (Board) issued a proposed rule to permit lessors to use electronic communications to provide the disclosures required under Regulation M. In our comment letter to the Board, CUNA supported the proposal to allow lessors to provide the required disclosures electronically. Because credit unions are owned and operated by their members, they want to provide the most efficient services for their members and providing disclosures electronically would help credit unions reach this goal.

In response to the comments received to the proposal issued in March 1998, the Board decided to issue the current proposed rule. These revised rules include the information that would have to be given to consumers and would require that consumers affirmatively indicate their consent. The proposed rules contain model forms for providing this information. These rules also provide lessors with the option of delivering the disclosures to an e-mail address designated by the consumer or making the disclosures available at another location, such as the lessor's website.

Again, CUNA supports the proposal to allow lessors to provide disclosures electronically. This is critical in order for credit unions to expand electronic service delivery methods. Because consumers are becoming increasingly comfortable with obtaining retail, financial, and other services electronically, we believe that all pertinent regulations should be revised to allow for the electronic delivery of all types of communications and services.

In the current proposal, the Board requested comment on a number of specific issues. CUNA's comments on these issues are as follows:

Verification by return receipt that a consumer has received the electronic disclosures.

The Board has requested comment on whether the electronic disclosure rules should include a requirement that lessors must verify, by return receipt, that a consumer has received the electronic disclosures.

Although some credit unions may want to provide such verification, we do not believe that it should be mandated. Similar verifications are not required for paper-based disclosures. For example, lessors are not currently required to verify that a consumer went to the mailbox to retrieve a paper disclosure. Such a requirement would be costly, burdensome and not necessary if additional copies are readily available in paper or electronic form.

Changes or additions to the Standardized Disclosures for obtaining consumers' consent for electronic disclosures.

We believe the forms may be confusing to some consumers and could be shortened without sacrificing the necessary information. For example, the forms could include only a description of the disclosures and a place for the consumer to check either electronic or paper disclosure. It is also not necessary to give consumers the option of selecting a paper format since lessors will have to provide paper disclosures unless the consumer opts to receive the information electronically.

The forms request information regarding the specifications of the consumer's computer. We do not believe that it is necessary to specify the hardware and technical requirements necessary to receive and retain electronic disclosures. Such information may not be readily known to consumers at the time they complete the form. We favor a less restrictive approach that allows lessors the ability to develop easier methods to help consumers determine if they have the hardware and technical capability to receive and retain the electronic disclosures. An example may be that a lessor could provide a consumer with an "on-line" test to determine if the consumer has the necessary capability. This could be as simple as instructing the consumer to click a button on their computer to determine if they can receive the disclosures.

Many credit unions may choose to provide additional information to their members in a brochure. We urge the Board to allow credit unions the option of providing a brochure, as opposed to requiring that such information be included in the model forms.

We believe lessors should have the option of providing some additional brief information. Lessors should be permitted to add information to tell the consumer what would happen if the lessor were to receive a returned, unopened e-mail. Lessors should also be permitted to add a statement that requests the consumer to keep the lessor advised of all postal/e-mail address changes and telephone number changes.

Another suggestion for simplification purposes would be to allow lessors to use a combined disclosure for the Board's regulations that permit electronic disclosures. For example, one disclosure form for Regulations B, E, M, Z, and DD could be used with a check-off box for each regulation where electronic disclosures will be permitted.

We also noticed that the model forms imply that electronic addresses end in ".com." This should be left blank so that other commonly used extensions such as ".org," ".net," or ".mil" may also be used. More such address extensions are inevitable as technology advances.

The 15-day notice requirement regarding changes to the information provided in the Standardized Disclosure.

We believe that 15 days is an appropriate time period for notifying a consumer of a change in terms to their agreement to receive disclosures electronically, especially if there is no mail delay. We recommend that this time period be incorporated into Regulation M, as opposed to stating this in the staff commentary. We also suggest that there be an exception that allows for no prior notice if a change must be made immediately for security reasons. This exception may be necessary if, for example, hackers violate a website.

The requirement to obtain the consumer's consent before providing electronic disclosures other than those described at the time consent was first obtained.

Many credit unions will prefer to supply an initial list of potential disclosures at the time consent is first obtained, as opposed to obtaining the consent for each new disclosure. This will reduce printing and mailing costs for the credit union and should be less confusing for the members. Because credit unions are member-owned, not-for-profit cooperatives, the savings realized as a result of the reduced costs can be returned to the members either in the form of lower interest rates on loans or higher dividends paid on member accounts. Some credit unions may prefer to require consent for each new disclosure. Regulation M should allow lessors to choose the option that is best for them.

In a further effort to reduce costs and burden for credit unions, we suggest that Regulation M only require lessors to inform consumers that future disclosures may be delivered electronically and that the lessor retains the right to send disclosures to postal mailing addresses if necessary. Just as lessors are not required to provide a list of potential disclosures that might be mailed in the future to a postal address, they should not be required to provide a detailed list of disclosures that might be delivered in the future to an electronic address or location. A detailed list of potential disclosures at the time of consent may be confusing for some consumers. Also, new disclosures may be added over time and having to revise the list constantly will become an additional burden for credit unions. Lessors should also have the flexibility to use other communications tools, such as registered mail, wire messages, and facsimiles, depending on the particular circumstances.

The burden of a 90-day minimum time period for maintaining disclosure information on a lessor's website.

The costs to credit unions for maintaining disclosure information for a minimum of 90 days are far less expensive than mailing disclosures to the members. Many credit unions have no problem with this requirement and some may prefer to maintain this information for longer periods of time, which may be helpful if there is future litigation.

However, electronic storage space costs money and some credit unions may have to purchase additional capacity to store disclosures electronically. To limit storage costs, lessors should be allowed to give consumers the option of deleting their disclosures from a lessor's website prior to the end of the 90-day posting period once they have viewed and retained the disclosures to their satisfaction. Again, because credit unions are member-owned, not-for-profit cooperatives, the savings realized as a result of the reduced costs can be returned to the members either in the form of lower interest rates on loans or higher dividends paid on member accounts. Credit union members will appreciate this opportunity to reduce costs and this will be comparable to receiving the disclosures at an e-mail address where the member has the ability to delete the e-mail.

The feasibility to: 1) provide disclosures in a format that cannot be altered without detection; 2) have systems in place capable of detecting whether or not the information has been altered; and 3) to use independent certification authorities to verify electronic documents.

All credit unions with a secure website will want to do everything possible to ensure that the disclosures cannot be altered in order to protect both the credit union and the members. Although it may be feasible, it is unreasonable to expect all credit unions to guarantee that the disclosures could not be altered without detection. Even if they could do so today, technology is continuously and rapidly changing and future software programs may be developed that will allow users to modify various types of documents. A requirement to provide anything other than "reasonable precautions" against alterations would likely be cost prohibitive.

We do not support any approach that would require lessors to hire independent certification authorities to verify electronic documents. Independent certification authorities could be costly and each credit union must analyze the costs to determine if that is the approach they want to take. Moreover, technology may develop that will provide more efficient verification technologies. The Board should permit financial institutions and the market decide which strategy is best.

Thank you for the opportunity to comment on the proposed amendments to Regulation M. If you or other Board staff have questions about our comments, please give me a call at (202) 218-7795.

Sincerely

Jeffrey Bloch
Assistant General Counsel


November 12, 1999

Ms. Jennifer J. Johnson
Secretary
Board of Governors of the
Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551

Re: Docket No. R-1040, Proposed Amendments to Regulation B Regarding Electronic Delivery of Disclosures

Dear Ms. Johnson:

The Credit Union National Association (CUNA) appreciates the opportunity to comment on the proposed amendments to Regulation B, which implements the Equal Credit Opportunity Act. The proposal, which appeared in the Federal Register on September 14, 1999, would permit creditors to use electronic communications to provide the disclosures required by Regulation B if the consumer agrees to such delivery. CUNA represents more than 90 percent of our nation's 11,000 state and federal credit unions.

In March 1998, the Federal Reserve Board (Board) issued a proposed rule to permit creditors to use electronic communications to provide the disclosures required under Regulation B. In our comment letter to the Board, CUNA supported the proposal to allow creditors to provide the required disclosures electronically. Because credit unions are owned and operated by their members, they want to provide the most efficient services for their members and providing disclosures electronically would help credit unions reach this goal.

In response to the comments received to the proposal issued in March 1998, the Board decided to issue the current proposed rule. These revised rules include the information that would have to be given to consumers and would require that consumers affirmatively indicate their consent. The proposed rules contain model forms for providing this information. These rules also provide creditors with the option of delivering the disclosures to an e-mail address designated by the consumer or making the disclosures available at another location, such as the creditor's website.

Again, CUNA supports the proposal to allow creditors to provide disclosures electronically. This is critical in order for credit unions to expand electronic service delivery methods. Because consumers are becoming increasingly comfortable with obtaining retail, financial, and other services electronically, we believe that all pertinent regulations should be revised to allow for the electronic delivery of all types of communications and services.

In the current proposal, the Board requested comment on a number of specific issues. CUNA's comments on these issues are as follows:

Verification by return receipt that a consumer has received the electronic disclosures.

The Board has requested comment on whether the electronic disclosure rules should include a requirement that creditors must verify, by return receipt, that a consumer has received the electronic disclosures.

Although some credit unions may want to provide such verification, we do not believe that it should be mandated. Similar verifications are not required for paper-based disclosures. For example, creditors are not currently required to verify that a consumer went to the mailbox to retrieve a paper disclosure. Such a requirement would be costly, burdensome and not necessary if additional copies are readily available in paper or electronic form.

Changes or additions to the Standardized Disclosures for obtaining consumers' consent for electronic disclosures.

We believe the forms may be confusing to some consumers and could be shortened without sacrificing the necessary information. For example, the forms could include only a description of the disclosures and a place for the consumer to check either electronic or paper disclosure. It is also not necessary to give consumers the option of selecting a paper format since creditors will have to provide paper disclosures unless the consumer opts to receive the information electronically.

The forms request information regarding the specifications of the consumer's computer. We do not believe that it is necessary to specify the hardware and technical requirements necessary to receive and retain electronic disclosures. Such information may not be readily known to consumers at the time they complete the form. We favor a less restrictive approach that allows creditors the ability to develop easier methods to help consumers determine if they have the hardware and technical capability to receive and retain the electronic disclosures. An example may be that a creditor could provide a consumer with an "on-line" test to determine if the consumer has the necessary capability. This could be as simple as instructing the consumer to click a button on their computer to determine if they can receive the disclosures.

Many credit unions may choose to provide additional information to their members in a brochure. We urge the Board to allow credit unions the option of providing a brochure, as opposed to requiring that such information be included in the model forms.

We believe creditors should have the option of providing some additional brief information. Creditors should be permitted to add information to tell the consumer what would happen if the creditor were to receive a returned, unopened e-mail. Creditors should also be permitted to add a statement that requests the consumer to keep the creditor advised of all postal/e-mail address changes and telephone number changes.

Another suggestion for simplification purposes would be to allow creditors to use a combined disclosure for the Board's regulations that permit electronic disclosures. For example, one disclosure form for Regulations B, E, M, Z, and DD could be used with a check-off box for each regulation where electronic disclosures will be permitted.

We also noticed that the model forms imply that electronic addresses end in ".com." This should be left blank so that other commonly used extensions such as ".org," ".net," or ".mil" may also be used. More such address extensions are inevitable as technology advances.

The 15-day notice requirement regarding changes to the information provided in the Standardized Disclosure.

We believe that 15 days is an appropriate time period for notifying a consumer of a change in terms to their agreement to receive disclosures electronically, especially if there is no mail delay. We recommend that this time period be incorporated into Regulation B, as opposed to stating this in the staff commentary. We also suggest that there be an exception that allows for no prior notice if a change must be made immediately for security reasons. This exception may be necessary if, for example, hackers violate a website.

The requirement to obtain the consumer's consent before providing electronic disclosures other than those described at the time consent was first obtained.

Many credit unions will prefer to supply an initial list of potential disclosures at the time consent is first obtained, as opposed to obtaining the consent for each new disclosure. This will reduce printing and mailing costs for the credit union and should be less confusing for the members. Because credit unions are member-owned, not-for-profit cooperatives, the savings realized as a result of the reduced costs can be returned to the members either in the form of lower interest rates on loans or higher dividends paid on member accounts. Some credit unions may prefer to require consent for each new disclosure. Regulation B should allow creditors to choose the option that is best for them.

In a further effort to reduce costs and burden for credit unions, we suggest that Regulation B only require creditors to inform consumers that future disclosures may be delivered electronically and that the creditor retains the right to send disclosures to postal mailing addresses if necessary. Just as creditors are not required to provide a list of potential disclosures that might be mailed in the future to a postal address, they should not be required to provide a detailed list of disclosures that might be delivered in the future to an electronic address or location. A detailed list of potential disclosures at the time of consent may be confusing for some consumers. Also, new disclosures may be added over time and having to revise the list constantly will become an additional burden for credit unions. Creditors should also have the flexibility to use other communications tools, such as registered mail, wire messages, and facsimiles, depending on the particular circumstances.

The burden of a 90-day minimum time period for maintaining disclosure information on a creditor's website.

The costs to credit unions for maintaining disclosure information for a minimum of 90 days are far less expensive than mailing disclosures to the members. Many credit unions have no problem with this requirement and some may prefer to maintain this information for longer periods of time, which may be helpful if there is future litigation.

However, electronic storage space costs money and some credit unions may have to purchase additional capacity to store disclosures electronically. To limit storage costs, creditors should be allowed to give consumers the option of deleting their disclosures from a creditor's website prior to the end of the 90-day posting period once they have viewed and retained the disclosures to their satisfaction. Again, because credit unions are member-owned, not-for-profit cooperatives, the savings realized as a result of the reduced costs can be returned to the members either in the form of lower interest rates on loans or higher dividends paid on member accounts. Credit union members will appreciate this opportunity to reduce costs and this will be comparable to receiving the disclosures at an e-mail address where the member has the ability to delete the e-mail.

The feasibility to: 1) provide disclosures in a format that cannot be altered without detection; 2) have systems in place capable of detecting whether or not the information has been altered; and 3) to use independent certification authorities to verify electronic documents.

All credit unions with a secure website will want to do everything possible to ensure that the disclosures cannot be altered in order to protect both the credit union and the members. Although it may be feasible, it is unreasonable to expect all credit unions to guarantee that the disclosures could not be altered without detection. Even if they could do so today, technology is continuously and rapidly changing and future software programs may be developed that will allow users to modify various types of documents. A requirement to provide anything other than "reasonable precautions" against alterations would likely be cost prohibitive.

We do not support any approach that would require creditors to hire independent certification authorities to verify electronic documents. Independent certification authorities could be costly and each credit union must analyze the costs to determine if that is the approach they want to take. Moreover, technology may develop that will provide more efficient verification technologies. The Board should permit financial institutions and the market decide which strategy is best.

Thank you for the opportunity to comment on the proposed amendments to Regulation B. If you or other Board staff have questions about our comments, please give me a call at (202) 218-7795.

Sincerely

Jeffrey Bloch
Assistant General Counsel