August 20, 2001
Ms. Jennifer J. Johnson, Secretary
Board of Governors of the Federal Reserve System
20th and C Streets, N.W.
Washington, D.C. 20551
Regulation Comments
Chief Counsel's Office
Office of Thrift Supervision
1700 G Street, N.W.
Washington, D.C. 20552
Mr. Robert E. Feldman
Executive Secretary
Federal Deposit Insurance
Corporation
550 17'h Street, N.W.
Washington, D.C. 20429
Attn: Comments/OES
Re: Study of Banking Regulations Regarding the Online
Delivery of Financial Services
FRB Docket R-1105, OTS Docket 2001-41, FDIC
#FR 01-17666
Dear Sir and Madam:
The American Bankers Association ("ABA") is pleased to respond
to the requests for comment on the studies by the Federal Reserve Board
("Board"), the Office of Thrift Supervision ("OTS")
and the Federal Deposit Insurance Corporation ("FDIC") of
banking regulations regarding the online delivery of financial services.
The results of these studies, required by the Gramm-Leach-Bliley Act
("GLB Act"),1 are to be reported to Congress together with any
appropriate recommendations for legislative or regulatory action. Many of
ABA's members, from the largest to the smallest banks and savings
associations, offer their services online. The ABA brings together all
categories of banking institutions to best represent the interests of this
rapidly changing industry. Its membership -- which includes community,
regional and money center banks and holding companies, as well as savings
associations, trust companies and savings banks -- makes ABA the largest
banking trade association in the country.
Summary Conclusion
At the outset, ABA commends the agencies for undertaking these surveys.
They will serve to highlight issues of concern in this rapidly evolving
mode of distribution, and we hope the agencies will continue these reviews
in the future.
ABA believes that at this time it is premature to recommend any specific
changes in regulations, policies, guidance or any other aspect of
supervision. The financial services industry has just begun to grapple
with the many issues involved in providing products and services online.
As banking organizations 2 and their customers begin to use new modes of
delivery, new issues continually arise and numerous solutions continually
are found. The pace of this change and experimentation is so rapid that
issues presented in six months or a year may not even be on the industry's
radar screen today.
Nonetheless, one underlying theme is becoming evident, even at this early
stage. In all of their pronouncements, regulators must be careful not to
make the industry responsible for circumstances over which customers-not
banking organizations-have control. A number of examples were discussed at
length in ABA's June 5, 2001 response to the Board's request for comments
on the Interim/Final rule on uniform standards for electronic delivery of
disclosures required by various consumer protection regulations.3 ABA's
response to the Interim/Final rule ("ABA comment letter") is
incorporated by reference in this letter.
Background
A primary purpose of the GLB Act was to modernize the financial services
industry and to enable banking organizations to compete no matter how the
industry evolved in the future. To this end, Congress directed the
agencies in section 729 of the Act4 to (1) study how particular statutes,
regulations or supervisory policies specifically affect the use by banking
organizations and their customers of new technologies and (2) determine
whether any revisions are needed to facilitate the online delivery of
products and services. In their requests for public comment, the Board,
FDIC and OTS have raised a number of issues that are addressed below.
Banking and Supervisory Regulations and Policies
The agencies have asked how particular regulations or supervisory policies
unreasonably interfere with or burden banking organizations' use of online
technologies, and whether the agencies should clarify or revise their
rules to address particular risks of online banking.
"Practical information resources" versus guidance. As banking
organizations continue to experiment with different kinds of technologies
and delivery methods, and gauge customer reactions and expectations, the
agencies could provide valuable assistance to the industry by means of
practical information resources. An example would be FDIC's recent
issuances on outsourcing.5
The key here would be to avoid characterizing such issuances as
"guidance" which too often is treated by examiners the same as
regulations and by the industry as "the only acceptable way to
proceed." Rather, practical information resources could bring
together lessons learned collectively in the industry, thus permitting
banking organizations to learn what has worked and not worked without
themselves making the same mistakes. This would particularly benefit
community banks that do not have the resources available for
experimentation that larger institutions do.
Hyperlinks. The agencies have noted that it is becoming more common for
banks to use hyperlinks on the websites to provide their customers with
access to third-party providers of both financial and nonfinancial retail
products or services. The agencies are concerned that customers may become
confused about whose website they have accessed and who is actually offering the product or service, and have asked whether they
should develop rules or guidance setting forth standards for the use of
hyperlinks.
ABA believes it is premature to consider setting standards when technology
and customer preferences are so in flux. Accordingly, ABA does not support
the development of any rules or guidance at this time. However, it would
be beneficial for the agencies to develop practical information resources
as described above for banking organizations to use. Of course, any such
resources or future regulations or guidance should be certain not to make
banking organizations responsible for devices used by or actions solely
within the control of the customer.
Electronic appraisals. The agencies have asked whether they should modify
their appraisal regulations to foster the use of electronic appraisals and
if so, what controls should be used to insure document authenticity and
integrity. The requirement for written appraisals applies to
"federally related transactions" in excess of $250,000. The
degree of authentication should be commensurate with the level of risk
involved in the transaction. It is appropriate that the Federal Financial
Institutions Examinations Council's recent guidance on authentication
6
leaves it to the individual institution to determine that the level of
authentication needed on any given transaction is "appropriate and
`commercially reasonable' in light of the reasonably foreseeable risks in
that application."7 However, as above, it would be beneficial for the
agencies to develop practical information resources for banking
organizations to use.
Geography and Time Considerations
Geography. The agencies have asked whether rules that are predicated on
conceptions of geography should be revised to accommodate the provision of
banking products and services online. Again, because of the rapid pace of
experimentation and technological change, ABA believes that changes are
not warranted at this time.
However, when such changes are considered, the agencies must exercise
caution because location designations may have implications beyond banking
law, such as in taxation of Internet commerce. The amendment proposed by
the Office of the Comptroller of the Currency8 demonstrates such caution.
The proposal is framed in the negative-rather than trying to redefine
"location" for Internet operations, it merely states that a bank
is not located in a state just because its products and services can be accessed
by state citizens through the Internet and because it has a server located
there. This could be a formula for dealing with specific issues without
trying to develop a definition of location in cyberspace to cover all
situations.
Time Considerations. With respect to regulations, such as Regulation CC,
that use terms such as "banking day," ABA believes that, at
least for the present time, the rules should not differentiate between
accounts opened traditionally and accounts opened online. This area is
evolving rapidly as new and existing customers become more comfortable
using the Internet for their banking activities.
At present, customers may use all available means to access information
about their accounts or to conduct transactions. ABA believes it would be
unwise to establish different time requirements based on the particular
mode used for any single transaction because it is not at all clear that
banks' information systems could currently track the differences. Nor
should there be any consideration of establishing a separate set of rules
for accounts that are opened online and conduct all activities online.
Moreover, ABA is unaware of customers requesting a more rapid timing
requirement for online accounts. Rather, it is likely that customers
assume that the rules that apply in the paper world are equally applicable
to online banking.
Banks' computer systems may be capable of differentiating timing
requirements on a transaction-by-transaction basis at some future time.
However, at present, neither the business case nor technological
capabilities warrant any change.
Similarly, customers may access up-to-date information online about their
account activity at their convenience at any hour of the day. As discussed
more fully in ABA's comment letter, such transaction histories should not
be deemed to be "periodic statements" under Regulations E, Z and
DD. To do so would most likely discourage banking organizations from
offering their customers this useful service. Moreover, ABA is not aware
that customers are having any difficulty distinguishing periodic
statements from transaction histories.
Electronic Signatures in Global and National Commerce Act
Although the Electronic Signatures in Global and National Commerce Act
("E-Sign Act") clarified a number of issues with respect to the
validity of electronic signatures, several key legal issues remain to be
resolved with respect to the impact of the Act on mechanisms for
providing electronically the disclosures required by the various consumer
protection statutes.
The agencies have asked whether it would be appropriate to develop
regulations or guidance to help banking organizations comply. ABA feels
strongly that a key factor in the lack of progress implementing digital
signatures is a result of the complexity of the consumer consent
provisions. As more experience is gained with online banking, ABA would
like to work the agencies to foster development and use of these
technologies by identifying classes of transactions that might be exempted
from those provisions, keeping in mind appropriate levels of consumer
protection.
For now, however, ABA believes it is simply too early for guidance or
rules. This is a time of significant experimentation by both banking
organizations and their customers as they try out various means of banking
online, and the pace of change is dramatic. Under these circumstances,
even guidance-however well intended-may be construed by banking
organizations as limiting their options to experiment with new products
and services and new technologies.
Electronic disclosures. The Board's Interim/Final rules require that
electronic disclosures or an alert about such disclosures be sent to a
public e-mail address. In addition, the rules require financial
institutions to take "reasonable steps" to attempt redelivery
using information in their files when an e-mail is returned as
undeliverable, including sending the disclosures to a different e-mail
address or postal address. As discussed in depth in ABA's comment letter,
(attached) ABA strongly disagrees with both requirements. Requiring use of
public e-mail address and requiring potential paper disclosures is not
necessarily in the consumer's best interest, poses operational problems,
and will stifle innovation and experimentation.
Many consumers do not wish to use a public e-mail address for privacy,
security, convenience, and personal reasons. We are also concerned about
the impact on on-line banking outreach programs. These programs allow
those without personal computers to have access to online banking through
special programs through mobile facilities, bank lobby computers, grocery
store computers, and web-enabled ATMs. An e-mail address requirement will
virtually eliminate many of these programs intended to bring technology to
those with less access.
In addition, consumers frequently change e-mail addresses. Maintaining
complete and updated information is very costly and, as a practical
matter, impossible to achieve in even the vast majority of cases.
The requirement to use another e-mail address or a postal address if the
e-mail is undeliverable is especially onerous and presents significant
operational challenges and costs. For example, home banking operations are
separate from the operations that produce paper statements. To prompt
production of a paper statement for a home banking account would require
expensive and manual intervention each time an e-mail is returned as
undeliverable. The alternative is to develop a new "bridge" to
connect to the paper statement operations, an expensive proposition. At
this time, the costs of either solution would most certainly outweigh any
savings from electronic access, chilling development and expansion of
electronic banking.
Many financial institutions, relying on existing rules, have developed
programs that do not provide for e-mail delivery of account information or
paper statements and we are not aware of any complaints about these
accounts. These institutions will be at a competitive disadvantage as they
will have to redesign their products and systems at significant expense.
New entrants will also encounter higher costs. Profits on online accounts
are already very marginal at best: increasing the cost by requiring new
systems and costly maintenance will negatively impact online banking
expansion by increasing their costs and lowering their availability.
ABA is currently engaged in discussions with Board staff concerning the
redelivery requirement. We are optimistic that a solution acceptable to
all parties will be produced.
Differing Legal Requirements
The agencies have asked whether there are any inconsistencies between
federal and state laws or regulations that impede the use of online
banking. The E-Sign Act, as the key federal law applicable to electronic
signatures, may conflict with the Uniform Electronic Transaction Act
("UETA"), which has currently been enacted by twenty-seven
states. However, each state is free to adopt modifications to its version
of UETA, and there are numerous differences between the state-enacted
versions and the model act. As a result, there is a significant amount of
controversy as to when and to what extent the E-Sign Act preempts each
state's UETA.
In addition, the Board has exempted certain consumer protection
disclosures from the E-Sign Act's preemption provisions. However, state
laws may continue to require that the consumer's consent be obtained. In
such cases, the extent to which state laws are preempted is unclear.
Conclusion
In conclusion, ABA believes that at this time it is premature to recommend
any changes in regulations, policies, guidance or any other aspect of
supervision. The financial services industry has just begun to grapple
with the many issues involved in providing products and services online,
and changes are occurring rapidly. ABA also urges the regulators to be
mindful in all of their pronouncements not to make the industry
responsible for circumstances over which customers-not banking
organizations-have control.
ABA looks forward to continuing to work with the agencies as new
technologies and online banking evolve. If you have any questions, please
do not hesitate to contact me.
________________________________
1 Pub. L. 106-102.
2 As used in this letter, the term "banking organizations"
includes all types of commercial banks, bank and savings and loan holding
companies, and savings associations.
3 On March 30, 2001 and April 4, 2001, the Board sought comments on the
Interim/Final rule establishing uniform standards for electronic delivery
of disclosures required by Regulation B (the Equal Opportunity Act),
Regulation E (the Electronic Fund Transfer Act), Regulation M (the
Consumer Leasing Act), Regulation Z (the Truth in Lending Act) and
Regulation DD (the Truth in Savings Act). 66 Federal Register 17322-17341,
17779-17804 respectively. The examples in ABA's comment letter concerned
the definition of electronic commerce, the "clear and
conspicuous" standard, the timing and effective delivery requirement,
retainability of disclosures, and advertising.
4 12 U.S.C. § 4801 note.
5 FDIC Bank Technology Bulletin, June 4, 2001.
6 Authentication in an Electronic Banking Environment, July 30, 2001.
7
_Id. at 3.
8 66 Federal Register 34855 at 34860, July 2, 2001.
Sincerely,
James D. McLaughlin
Director
Regulatory and Trust Affairs
June 5, 2001
Ms. Jennifer J. Johnson
Secretary
Board of Governors
of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, D. C. 20551
Re: Interim Final Rule Regulation B; Docket No.R-1040
Interim Final Rule
Regulation E; Docket No.R-1041
Interim Final Rule Regulation M; Docket No.
R-1042
Interim Final Rule Regulation Z; Docket No.R-1043
Interim Final
Rule Regulation DD; Docket No.R-1044
The American Bankers Association ("ABA") is pleased to submit
our comments to the Federal Reserve Board's (the Board")
interim/final rule establishing uniform standards for the electronic
delivery of disclosures required by various acts and regulations:
Regulation B; (the Equal Opportunity Act) Regulation E (the Electronic
Fund Transfer Act); Regulation M (the Consumer Leasing Act); Regulation Z
(the Truth in Lending Act); and Regulation DD (the Truth in Savings Act).
The" proposals were published in the 30 March 2001 and 4 April 2001
Federal Register. Under the rules, financial institutions may deliver
disclosures electronically if they obtain consumers' affirmative consent
in accordance with the Electronic Signatures in Global and National
Commerce Act. ("E-Sign Act"). The rules were adopted as interim
rules to allow for additional public comment.
The ABA brings together all elements of the banking community to represent
the interests of this rapidly changing industry. Its membership - which
includes community, regional, and money center banks and holding
companies, as well as savings associations, trust companies, and savings
banks - makes ABA the largest banking trade association in the country.
Generally, we believe that the regulations reflect the Board's effort to
adopt flexible and practical regulations that ensure consumer protections
and also recognize certain technological limitations. Our main concern is
that in a number of areas, the Board appears to be restrictive, endorsing
a particular technology. For example, the regulations require that
disclosures, or notices of disclosures, be delivered to a general
e-mailbox. We believe that the regulations should permit and encourage
further experimentation in the current changing and emerging environment.
Methods and approaches appropriate in a paper world may not be the most
effective ones in an electronic world. At this time, there are
no clear consumer preferences, responses, and habits for electronic access
to financial account information. Accordingly, we urge the Board to
continue to allow experimentation.
Definition of electronic communication.
The definition of electronic communication remains substantially unchanged
from the 1999 proposals and means a message transmitted electronically
between a financial institution and a consumer in a format that allows
visual text to be displayed on equipment, for example, a personal computer
monitor. The Supplementary Information explains that the equipment on
which the text message is received is not limited to a personal computer,
provided the visual display used to deliver the disclosures meets the
"clear and readily understandable" or "clear and
conspicuous" format requirement.
We suggest that the Commentaries make clear that the text must be made
"available" in a clear and conspicuous (or clear and readily
understandable under Regulation E) format. Today, consumer can view
electronically transmitted materials on a variety of equipment other than
personal computers, as the final/ interim rules recognize. For example,
consumers can view electronically transmitted materials on small, hand
held devices. These small devices may alter how the information is
displayed, limiting the amount of information displayed on the screen or
altering the fonts and format. Financial institutions cannot control how
the consumer chooses to access the information. The Commentaries should
recognize this and only require that it be made available in a clear and
conspicuous format.
Clear and conspicuous. ("Clear and readily understandable" for
Regulation E)
In accordance with the E-Sign Act, the financial institutions must provide
the disclosures in a clear and conspicuous format. In addition, pursuant
to the E-Sign Act,
1. The financial institutions must disclose the requirements for accessing
and retaining disclosures in that format;
2. The consumer must demonstrate the ability to access the information
electronically and affirmatively consent to electronic delivery; and
3. The financial institution must provide the disclosures in accordance
with the specified requirements.
The Commentaries should explain that financial institutions do not violate
these requirements if, after the financial institution has initially met
these requirements, a consumer changes hardware or software that does not
allow access to the information.
Timing and effective delivery.
Generally, consumers must be required to access required disclosures
before proceeding with opening an account or completing a transaction. A
link to the disclosures satisfies the timing rule if the applicant cannot
bypass the disclosures before submitting the application or completing the
transaction. Alternatively, the disclosures must automatically appear on
the screen, even if multiple screens are required to view all of the
information. The financial institution is not required to confirm that the
applicant has read the disclosures.
The Commentaries should recognize that consumers can sabotage or
circumvent required links with software that allows them to disable
pop-ups, banners, or links. The Commentaries should add that financial
institutions must make reasonable or good faith steps to require that the
links be accessed before the consumer may proceed. The Commentaries should
note that it is not a violation if the consumer takes measures to disable
the link.
Retainability of disclosures.
The rules provide that disclosures are in a format that the consumer may
keep if the electronic disclosures are "delivered" in a format
that is capable of being retained (such as by printing or storing
electronically). We suggest that the regulations delete
"delivered" and substitute "sent" or "made
available." The financial institution cannot know whether the
consumers' equipment crashed, was destroyed etc. and therefore were never
"delivered."
Consent.
Generally, financial institutions must obtain a consumer's
"affirmative consent in accordance with the requirements of the
E-Sign Act." Under Regulation B, no consent is required for
disclosures of the notice of the right of appraisal (if not routine),
monitoring information, and the right to reasons (business credit) is
provided on or with the application. In addition, consent is not required
for advertisements under Regulation M and Regulation Z. Consent is also
not required under Regulation DD to make account disclosures available
upon request or to advertise deposit accounts.
We strongly support these exceptions to the consent requirement. It would
be unreasonable and not helpful to consumers if they were required to
provide consent under these circumstances. These disclosures are available
to help inform consumers before they open an account. Adding impediments
such as consent would unnecessarily hinder shopping for account
information.
Address or location to receive electronic communication.
Under the rules, financial institutions must:
1. Send the disclosure to the applicant's electronic address; or
2. Make the disclosure available at another location such as an internet
web site and
- alert the applicant at the applicant's electronic address (or to a postal
address, at the creditor's option), identifying the account involved and
the web site address or other location.
- make the disclosures available for at least 90 days from the date the
disclosure first becomes available or from the date of the first notice,
whichever is later.
The Commentary explains that an applicant's electronic address is an
e-mail address that is not limited to receiving communications transmitted
solely by the creditor. This excludes, for example, home-banking programs
that allow consumers to communicate directly with a creditor on-line with
the use of a computer and modem.
We strongly recommend that the Board delete the requirement that the
consumer reserve the disclosures or an alert about the disclosures at the
consumer's e-mail address.
We recognize the appeal of such a requirement and understand the concern
that some consumers may forget or neglect to access their home banking
account periodically to review their statements. For example, they might
not be aware of unauthorized transactions or changes in terms. However, we
do not believe that these concerns justify limiting how disclosures are
provided to customers.
We do not believe that the Board should restrict how financial
institutions and consumers choose to obtain disclosures, especially in a
time of experimentation with new technology and new products where
consumer preference and technological constraints are not clear. Many
consumers may not wish to receive account notices at an e-mail address.
Most today are not received in this fashion and we are unaware of any
complaints or problems. In addition, using an e-mail address may not be
practical. Finally, the Board appears to be dictating: use of a particular
technology, in contravention of the E-Sign Act.
The Board's approach is. based on the assumption that customers are more
likely to check an e-mailbox than access their home banking account. This
is not necessarily true. Indeed, some customers may not want to receive
bank notices at their e-mail address. For example; for privacy reasons,
they may not
wish information - even if it is just the existence of an account - sent
to an e-mailbox. They may have a shared household e-mail address and
prefer to keep such information private. Their only e-mail account may be
at their place of employment where they do not wish to receive financial
account information notices, both for privacy and professional reasons.
They may also feel that direct on-line access to their bank is more secure
than regular e-mail. They may not want the many e-mails from all their
accounts to clutter their e-mailbox where they might get overlooked. The
expansion of account aggregation may add to the desire to access account
information a secure, private fashion that does not entail dozens of
e-mails. Some consumers may have reasons to change their e-mail address
frequently.
Moreover, most customers accessing their accounts electronically today
access them not through their e-mailbox, but directly through the
financial institution's line. We have heard of no problems with this
arrangement. Banks report that most customers access their accounts
frequently. If electronically accessing financial accounts becomes more
common among "less sophisticated" users and these customers
prefer to receive financial information and alerts through e-mails, the
market will respond by accommodating them. Or they can. continue to
receive paper statements. Just as today, customers can still receive their
checks with their bank statements, customers will be able to choose how to
receive their financial information.
We also believe that sending information to an e-mailbox may not be
practical and will not guarantee consumers will receive and access their
account information. E-mail addresses change frequently: one bank reported
that
between 25% and 50% of its e-mail addresses are incorrect. Consumers
change e-mails frequently: e.g., to change service providers because of
unsatisfactory service, avoid spamming, or a change in marital status or
living arrangement. The sender is frequently unaware that the e-mailbox is
no longer used as providers do not usually return notices that the mailbox
has been closed. Thus, the financial institution may not be aware that it
is sending e-mails to e-mail addresses that are no longer used.
In addition, financial institutions, relying on the earlier rules, have
built systems that utilize on-line direct access to the financial
institution. These financial institutions will have to dismantle those
systems and construct a different - and not necessarily better- system at
great expense. Moreover, maintaining accurate and up-to-date e-mail
addresses is very expensive and labor intensive. Given the questionable
rationale and benefit, we do believe the expense is unjustified.
We also challenge the Board's authority to impose this requirement. In
essence, it is dictating a particular technology which the E-Sign Act
specifically prohibits. Section 104(b)(3)(A) provides: "Nothing in
this paragraph shall be construed to grant any Federal regulatory agency
or State regulatory agency authority to require use of a particular type
of software or hardware in order to comply with section 101(d)."
Rather than dictate a particular method, the Board should allow financial
institutions and their customers to determine the best and preferred
method. The regulations should allow financial institutions to alert
their.customers through e-mail notice or an alert that a message is
waiting provided when the customer signs onto the bank's home banking
page.
If the Board retains the current requirement to provide information in an
e-mailbox, it should provide at least 18 months to allow financial
institutions to develop and implement systems that permit it. Many
financial institutions that
built systems based on the earlier regulation will be at a competitive
disadvantage if they must now convert without adequate lead time.
Identifying account involved.
The regulations permit financial institutions to identify a specific
account in a variety of ways and do not require the use of the account
number. For example, where the applicant has only one credit card account,
and no confusion would result, the creditor may refer to "your credit
card account." We appreciate the Board's flexibility and believe that
this is a useful and reasonable explanation.
90-day rule.
Financial institutions have the discretion to determine whether the
disclosures should be available at the same location for the entire
period. We believe that this is a reasonable accommodation that will help
to reduce costs.
Redelivery.
Under the rules, financial institutions must take "reasonable
steps" to attempt redelivery using information in its files. The
Commentaries further explain that if an e-mail is returned as
undeliverable, the redelivery requirement is satisfied if, for example,
the financial institution sends the disclosures to a different e-mail
address or postal address that it has on file. According to the
Commentaries, sending the disclosures a second time to the same electronic
address is not sufficient if the financial institution has a different
address on file.
We strongly object to this additional requirement. First, the Commentaries
appear to require paper disclosures, contrary to Section 104 (c)(4) of the
E-Sign Act which specifically prohibits requiring paper disclosures.
Second, consumers have a responsibility to notify financial institutions
of changes in e-mail addresses. Third, providing paper disclosures will be
expensive because it duplicates systems and requires labor-intensive
intervention, eliminating some of the economies from electronic delivery
of disclosures. In any case, the regulations should permit second attempts
at the original e-mail address. First e-mails are often returned as
undeliverable for reasons due to temporary circumstances: often the second
attempt is successful.
The Supplementary Information notes that the interim rule does not impose
a verification requirement because the cost and burden associated with
verifying delivery of disclosures would not be warranted. We appreciate
the Board's recognition of the impracticality of a requirement to require
confirmation.
Advertising.
The Commentaries require that certain terms, for example, under Regulation
DD, the annual percentage yield and the interest rate (if provided), be
able to be viewed simultaneously. Our general concern is that the
financial institution cannot control the consumers' devices or how the
screen is configured. For example, a small device may not permit
simultaneous viewing. Scrolling or sequential viewing may be needed on
some devices. As with the requirement to provide text in clear and
conspicuous format, the Commentary should provide that disclosures be
"made available" so that they may be viewed simultaneously. In
addition, the Board should permit terms that normally must be provided
simultaneously, e.g., APYs and interest rates, to flash alternatively.
This device can be very effective in drawing the consumers' attention and
should not be prohibited.
Regulation DD.
Under Regulation DD, a depository institution may provide the disclosures
electronically if the consumer provides an electronic mail address. The
Commentary indicates that ten business days is a reasonable time for
responding to the request for account information that consumers do not
make in person, including requests made by electronic communication. This
is a reasonable approach. We suggest that the Commentary clarify that the
depository institution may provide the disclosures in paper, even if the
request is received electronically.
Additional issues:
Document Integrity. The interim rules do not impose document integrity
standards. The Board recognizes the concerns about document integrity, but
believes it is not practicable at this time to impose document integrity
standards for consumer disclosures or mandate the use of independent
certification authorities. Moreover, the issue of document integrity
affects electronic commerce generally and is not unique to the written
disclosures required under the Board's consumer protection laws. We agree
with the Board that it is premature to require integrity standards.
Additional consent guidance. The Board asks whether its should exercise
its authority under the E-Sign Act in future rulemakings to interpret the
consumer consent provision or other provisions of the act as they affect
the Board's consumer protection regulations. For example, the Board asks
whether interpretative guidance is needed concerning the statutory
requirement that applicants confirm their consent electronically in a
manner that reasonably demonstrates they can access information in the
form to be used by the creditor. It asks whether clarification is needed
on the effect of applicants withdrawing their consent or on requesting
paper copies of electronic disclosures.
At this time, we do not believe that it is necessary or desirable for the
Board to do so. Banks may wish to include additional examples and guidance
in the future, but now is a time for experimentation. Technology, methods,
and consumer preferences are changing too quickly. Examples at this time
would tend to be restrictive and might inhibit better and more creative
methods.
The Board notes that financial institutions must also inform applicants of
changes in hardware or software requirements if the change creates a
material risk that the applicant will not be able to access or retain the
disclosure. The Board solicits comment on whether regulatory standards are
needed for determining a "material risk". We believe that the
E-Sign Act already addresses this adequately.
Study on Adapting Requirements to Online Banking and Lending.
The E-Sign Act eliminated legal impediments to the use of electronic
records and signatures. The Board requests comments on whether other
legislative or regulatory changes are needed to adapt current requirements
to online banking and lending and facilitate electronic delivery of
consumer financial services.
As an example, under Regulations E, Z, and DD, periodic statements inform
consumers about their account activity over a period of time, typically
monthly. In addition, transmittal of the periodic statement triggers
important consumer protections such as error resolution procedures. Online
banking, however, can provide consumers with up-to-date information about
their accounts on a continuing basis. The Supplementary Information notes
that such information is a helpful supplement to - but does not comply as
a substitute for - periodic statements. The Board asks whether rules for
periodic statements
should be modified for online banking, and if so, how could the rules be
created to maintain for consumers 1) a perspective of the activity of an
account over time and 2) protections for resolving errors or liability for
unauthorized transactions.
At this time, we do not believe that there is any reason to take steps to
modify rules applied to periodic statements. Whether or not the
disclosures are delivered by paper or electronically, they must be
provided in a clear and conspicuous format. Thus, consumers will still
receive the needed information. In fact, they may be more likely to review
such information.
We suggest that the Commentaries related to periodic statements make clear
that listing transactions, even if presented by grouping transactions
according to a specific period, e.g., monthly, does.not constitute a
periodic
statement for purposes of the regulations. As a customer service,
financial institutions allow customers to view transaction histories
on-line. Consumers are able to obtain up-to-date information about account
activity as well as research old transactions in an efficient, user
friendly, and economical fashion. For technical reasons, they may be
segregated by a time period, e.g., by billing period.
These transaction histories should not be treated as periodic statements.
In effect, allowing consumer to view transaction history on-line is no
different than using the telephone to inquire about transactions. It is
just simpler, faster, and easier to use. There is no reason to include
information required for periodic statements, as consumers will receive
them separately. Requiring the disclosures will simply discourage
financial institutions from offering a useful and popular service.
The ABA appreciates the opportunity to comment on these important
rules. We commend the Board on its overall flexible approach that will
encourage experimentation and innovation. We are happy to provide any
additional information.
Nessa Eileen Feddis
Senior Federal Counsel
Government Relations/
Regulatory & Trust Affairs
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