RSK.IQ Question of the Week 12/30/13

Sending Account Opening Disclosures and Excessive Transaction Notices Electronically

May a bank send Regulation DD account opening disclosures or Regulation D excessive transactions notices electronically? If a bank can do this, must it comply with the requirements of the E-SIGN Act?

Some laws or regulations allow required disclosures in writing to be sent electronically, provided that the requirements of the Electronic Signatures in Global and National Commerce Act (the “E-SIGN Act”) are complied with. 

These requirements are as follows:

  1. Informing the consumer in a clear and conspicuous manner that the consumer has the option of receiving the disclosure in writing or electronically;
  2. Informing the consumer that the disclosures pertain to a particular transaction or group of records;
  3. Informing the consumer of any fees that will be charged for sending the disclosures electronically;
  4. Informing the consumer how a paper copy of the disclosure can be obtained;
  5. Informing the consumer that the consent to having the disclosures made electronically can be withdrawn;
  6. Providing the consumer with the procedure for withdrawing the consent;
  7. Providing the consumer with the specifics of the hardware and software necessary to receive the disclosures electronically;
  8. Obtaining the consent of the consumer to having the disclosures made electronically. 15 U.S.C. 7001(c).

The E-SIGN Act covers all “electronic records,” when an “electronic record” is defined as “a contract or other record created, generated, sent, communicated, received, or stored by electronic means.” 15 USC 7001(c)(1), 7006(4). A email, therefore, is an electronic record.

In answer to the questions, Regulation DD allows account opening disclosures to be sent to consumers electronically, if the sending is compliant with the requirements of the E-SIGN Act. 12 CFR 1030.4(a)(1)(i).

Regulation D, however, does not require written notification of excessive transactions. Such notification is optional for a bank, if it adopts procedures for monitoring an account rather than preventing withdrawals or transfers in excess of the permitted limits. It need not be in writing. A footnote to 12 CFR 204.(d)(2) provides as follows:

“For customers who continue to violate those limits after they have been contacted by the depository institution, the depository institution must either close the account and place the funds in another account that the depositor is eligible to maintain, or take away the transfer and draft capabilities of the account.”

The method of “contact” is not specified. Similarly, a Federal Reserve Board Staff Opinion Letter refers to an institution that “notifies” a customer of excessive transfers. Federal Reserve Regulator Service, Locator 2-342.2. The FDIC Compliance Manual also refers to procedures to “contact customers who exceed established limits on more than an occasional basis.” FDIC Compliance Manual VI-4.4.

Since the method of contact or notification is not specified by the regulation, there is no reason why it could not be made electronically. There is also no requirement that such electronic notification must comply with the requirements of the E-SIGN Act, since there is no requirement that the notification be in writing. As a matter of good practice, however, the method of notification should be established contractually by being made part of the bank’s account opening disclosures.

This entry was posted on Monday, December 30th, 2013 at 2:00 pm.

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