CFPB CONSENT ORDER WITH USAA: a primer on Reg E compliance!


USAA has pioneered electronic banking in order to serve its members—some of whom serve in military institutions around the world.  However, it has been slapped around by the CFPB in a consent order issued January 2, 2019.  The order is well worth reading as the “conduct” provisions provide a good procedural guide on how to comply with Reg E, including its error resolution and stop pay provisions.

Link to the Order

The violations included failing to stop pay on preauthorized electronic fund transfers—particularly from payday lenders.  The bank directed customers to communicate with the payee–a good recommendation—but then didn’t appropriately handle the actual stop pay request.  Reading between the lines, it appears likely that payday lenders were gaming the system and re-sending payments in ways to avoid the stop pay.  Problems were found with error resolution investigations. USAA gave its customers a warning about putting their USAA membership at risk and about making false statements to a bank. This warning was combined with a general conversation with members about payday loan contracts.  Written Statements of Unauthorized Debit were only provided after the warning, and they were required to be notarized.

In addition, the CFPB concluded that it was a UDAAP for the bank to reopen closed depository accounts after the customer had closed them without getting the consumers’ prior authorization and providing timely notice of such reopening.

The CFPB only directly examines bank with $10B or more in assets; however, this order is worth reading by all bank operations staff. Although the order is 39 pages, it is in REALLY big type.  Skip ahead to pages 15-19 for a helpful outline on the corrective procedures.  Also notice the duties imposed on the board of directors to manage compliance with this order.

As society continues its move to more and more electronic transactions, all banks must be on top of their game in managing stop pays and error resolution.  If not already in place, set up a tracking/ticketing system for these issues.  Be sure that employee training is up to this challenge.  If you don’t have them, consider using scripts to make sure that employees handling stop pays and error resolution provide accurate information about consumer rights and the process.  Don’t require consumers to go to the payee but DO explain the importance of revoking preauthorized payments—if that is the correct response.

Now the CFPB just needs to go after payday lending practices!

Karen Neeley

Kennedy Sutherland, LLP

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