Consumer Compliance Supervisory Highlights
Earlier this month, the FDIC released the inaugural issue of Consumer Compliance Supervisory Highlights. The Highlights are intended to provide the public and supervised institutions with information and observations related to the FDIC’s supervisory activities. It also includes a high-level overview of identified consumer compliance issues. This is a great read for anyone in a compliance-related position, not just those under the FDIC’s umbrella.
Some focal points from the Highlights include:
Overdraft Programs Unfair or deceptive claims may arise when institutions using an available balance method assess more overdraft fees than are appropriate based on the consumer’s actual spending, or when institutions do not adequately disclose how the available balance method works. To protect the institution, disclosures should be clear and conspicuous relating to the possible imposition of an overdraft fee. When using an available balance method, the institution should ensure that any transaction authorized against a positive available balance does not incur an overdraft fee, even if the transaction later settles against a negative available balance.
Resolution Process under Regulation E The FDIC noted that the calculation of consumer liability for unauthorized transfers was often completed incorrectly because of misapplied timing requirements; institutions did not begin the error resolution process investigation promptly upon (verbal) notice of an error, and did not provide notice upon completion of the investigation. The Highlights also discussed “discouraging the filing of error resolution requests,” which may include onerous requirements such as: requiring the consumer to visit a branch to file notification, requiring notarized affidavits, requiring the filing of a police report, and/or requiring consumers to agree to assist law enforcement and/or serve as witnesses in any action brought against the perpetrators.
Skip-A-Payment Loan Programs Not fully disclosing the effects of a skipped payment may lead to unfair or deceptive claims. Issues identified in the Highlights include failing to notify borrowers that a skipped payment would lead to additional interest over the life of the loan, result in a larger final payment, and may result in escrow shortages or deficiencies. In order to mitigate the risk of claims, the FDIC recommends providing borrowers with clear and adequate disclosures that detail how the skip program will work and any potential impact on the affected loan. These disclosures should clearly define eligibility criteria, staff training, and monitoring.
We recommend reviewing your institutions policies and procedures after reviewing the Highlights. If you have any questions or need help assessing your institution’s risk, please email us at ContactUs@ComplianceServicesGroup.com.
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