As the profound impacts of COVID-19 become ever clearer, the Consumer Financial Protection Bureau (CFPB) continues its recent increase in activity in this space with a new statement and set of frequently asked questions (FAQs), outlining the responsibility of certain financial firms during the pandemic. We provide the details below.
In a word, the pandemic. In pronouncements issued May 13, 2020, the CFPB draws attention to the billing error responsibilities of credit card issuers and other open-end non-home-secured creditors during the pandemic. Likewise, the CFPB is separately encouraging financial firms “to continue to provide the kind of assistance to their communities that many have been providing, such as waiving fees, lowering minimum-balance requirements, and implementing changes in account terms that benefit consumers.”
Two sets of FAQs provide additional answers in this regard. In the first, providers of checking, savings or prepaid accounts are “reminded” that they can offer consumers immediate relief by changing account terms without advance notice where the change in terms is clearly favorable to the consumer.
But, in light of the Federal Reserve Board’s April 2020 interim final rule deleting the six-per-month transfer limit on savings accounts, an institution may eliminate transfer fees on savings accounts without providing advance notice.
In the second set of FAQs, the CFPB focuses on existing regulatory flexibilities for non-secured open-end credit that may be useful for assisting customers. In general, a creditor must provide the consumer with written notice at least 45 days prior to a significant change in terms, per Regulation Z (see 12 C.F.R. § 1026.9(c)(2)(i)(A)). But, as the CFPB notes, there is no advance notice requirement if the creditor chooses to extend a credit card account’s grace period.
In a third release, the CFPB has published a statement designed to assist consumers, small-business owners and their creditors in managing the pandemic’s credit-related challenges. It likewise outlines creditors’ responsibilities during the crisis and provides them with temporary and targeted relief to ensure that they are able to assist their consumer customers and accurately resolve their billing error claims.
The law is straightforward. The federal Truth in Lending Act generally requires that creditors investigate and resolve consumers’ billing error notices within specified maximum time frames. Nevertheless, the statement “provides notice to creditors” that the CFPB will take a “flexible supervisory and enforcement approach” with respect to those time frames where creditors demonstrate a good faith effort to comply with their statutory and regulatory obligations. The CFPB emphasizes, however, that this flexibility does not extend to certain required actions that creditors must take, nor does it extend to certain prohibited actions that creditors must not take, during the pendency of consumers’ billing error claims.
To view the Statement on Supervisory and Enforcement Practices Regarding Regulation Z Billing Error Resolution Timeframes in Light of the COVID-19 Pandemic, click here.
To view the CFPB’s Payments and Deposits Rules FAQs related to the COVID-19 Pandemic, click here.
To view the CFPB’s Open-End (not Home-Secured) Rules FAQs related to the COVID-19 Pandemic, click here.
Why it matters
It remains problematic that the CFPB continues to issue guidance that may ultimately be ignored by state attorneys general, plaintiffs’ lawyers and the courts. As we have previously warned, regulated entities should be cautious in relying upon CFPB statements that may be viewed as being at odds with federal law and regulations, as these guidelines lack the force and effect of law. Instead, their greatest value (as with all compliance aids, including both FAQs and informal statements) may be that while regulated entities are not required to comply with their provisions, if they do, the CFPB—when exercising its supervisory and enforcement functions—“does not intend to sanction, or ask a court to sanction, entities that reasonably rely” on such aids.