Promoting Electronic Statements

Inquiry/Issue

Due to the costs involved in mailing paper statements, the Bank would like to encourage its customers to enroll in electronic statements. Can the Bank offer current and new customers a small promotion (i.e., a $5 account bonus) to encourage them to enroll in to electronic statements? Alternatively, may the Bank impose a small monthly fee on all current and new accounts receiving paper? What disclosures or notices must accompany either the bonus or fee?

Response Summary

Regulations DD and E would allow electronic disclosures to be made, provided the terms of the E-Sign Act are complied with. The E-Sign Act would not permit such records to only be made electronically, however, so the Bank is correct in considering a “bonus” or fee for receiving paper statements in order to encourage customers to agree to receive electronic statements. For the purposes of Regulation DD, the $5 promotion would not be considered a “bonus,” and the special disclosures for bonuses would not have to be made. Federal and New Jersey law would not preclude charging a fee for paper statements, though the limitation on periodic fees that can be charged for New Jersey Consumer Checking Accounts would have to be observed. The Bank may also consider offering a fee reduction for consumers who agree to receive their statements electronically. If a fee increase is made for paper statements, the Bank will have to provide notice of it at least 30 days before it goes into effect. If a fee reduction is offered instead, no advance notice is required, though as a matter of good banking practice and to promote the use of electronic statements, the Bank will want to notify its accountholders.

Response Detail

E-SIGN Act and Requiring Electronic Statements

The Electronic Signatures in Global and National Commerce Act (“E-Sign Act”), 15 USC 7001 et seq., prohibits requiring only electronic statements. Under section 7001(b)(2), the statute states that it does not:

require any person to agree to use or accept electronic records or electronic signatures, other than a governmental agency with respect to a record other than a contract to which it is a party.

The Bank is therefore correct in considering a promotion to encourage the use of electronic statements or a fee for paper statements, rather than requiring the use of electronic statements.

If a Federal consumer protection  law or regulation requires a disclosure to be made in writing, the use of an electronic record satisfies the requirement if the consumer has affirmatively consented to such use, has received the disclosures required by the E-Sign Act, including:

• Whether the consent applies to a particular transaction or category of transactions
• The right to have paper records
• The hardware and software requirements for receiving electronic records
• The procedures the consumer may use to withdraw consent

The consumer must then electronically provide consent or confirm consent given earlier in such a way as demonstrates that the consumer can access information in electronic form. 15 USC 7001(c)(1).

Regulation DD and Regulation E

Both Regulation DD and Regulation E provide that required disclosures must be in writing. Both regulations allow the requirement for written disclosures to be satisfied by electronic disclosures made to the consumer, subject to compliance with the requirements of the E-Sign Act. 12 CFR §§1030.3(a), 1005.4(a)(1), 9(b).

The Bank would, therefore, be permitted to make deposit account disclosures electronically to consenting consumers.

Promotion

If the Bank were to offer a bonus upon account opening, it would have to make the disclosures prescribed by section 1030.4(b)(7) of Regulation DD.

While the Bank has described the $5 to be given for accepting electronic statements as an “account bonus,” however, under Regulation DD, the term “bonus” means:

a premium, gift, award, or other consideration worth more than $10 (whether in the form of cash, credit, or merchandise, or any equivalent) given or offered to a consumer during a year in exchange for opening, maintaining, renewing, or increasing an account balance. The term does not include interest, other consideration worth $10 or less during the year, the waiver or reduction of a fee, or the absorption of expenses. 12 CFR §1030.2(f).

In this case, the promotion would not be considered a “bonus,” in that it is not worth more than $10 or not being offered in exchange for opening, maintaining, renewing, or increasing an account.

As a matter of good banking practice, the Bank would disclose the availability of the promotion in a clear and concise manner as to what it consists of, how the consumer may apply for it, and how long it will be available.

Fee for Paper Checks

Neither Federal nor New Jersey laws or regulations preclude charging a fee for paper checks. With regards required New Jersey Consumer Checking Accounts, however, periodic account fees cannot exceed $3.00 per cycle. NJAC 3:1-19.2(6).With regards this type of account, the Bank may not charge a fee for paper checks that would exceed the regulatory limitation on account fees.

A question that may be raised by the public advocacy groups would be how a bank can charge for a paper statement for which the E-Sign Act would require the Bank to make available to consumers who decline to receive records electronically. The response would be that fees assessed by the Bank for particular services are cost-based and that those pertaining to paper account records are appropriate.

In order to avoid such a question, however, the Bank might consider offering a fee reduction in the monthly service charge for a consumer accepting an electronic statement, rather than increasing a specific charge for paper statements.

If the Bank increases the fee for receiving paper statements, then for existing accounts, Regulation DD will require it to provide notice at least 30 calendar days prior to the effective date of the increase. The notice could appear in the periodic statement, provided that it was segregated from the other disclosures. The Bank could also send a revised fee schedule along with the periodic statement, with the changes in the schedule highlighted. 12 CFR §1030.5(a)(1); Official Interpretations, ¶5(a)(1)-1.

Alternatively, if the Bank reduces fees for consumers receiving their statements electronically, no notice would be required under Regulation DD, since the change did not affect consumers adversely. 12 CFR §1030.5(a)(1). As a matter of good banking practice, however, as well as to promote the use of electronic statements, the Bank should inform accountholders of the change, as through a notice of their periodic statements.

This entry was posted on Monday, April 13th, 2015 at 1:30 pm.