Electronic disclosure reg generally supported by credit unions

WASHINGTON-The national credit union trade associations, in comment letters to the Federal Reserve, wrote that they generally support the electronic disclosures interim rule promulgated by the Fed. The e-disclosure regs became effective March 30 and will become mandatory October 1 under the Electronic Signatures in Global and National (E-Sign) Commerce Act signed into law by President Bill Clinton last year. The key issue that CUNA and NAFCU raised about the regulation was the Fed’s definition of what an electronic address is, which they considered highly constricted. The agency’s current definition of `electronic address’ is `an e-mail address that is not limited to receiving communications transmitted solely by the creditor.’ ” “ The Fed uses a pretty restrictive definition of electronic address and basically, it is restrictive to the extent that it prohibits e-mails through home banking systems because the definition is defined as an e-mail address as to be one that’s not limited to communication between a lender and a consumer,” CUNA Assistant General Counsel Jeff Bloch said. NAFCU went further in its comment letter, writing that it “believes that the Board has violated both the plain working and the intent of the E-Sign Act. NAFCU noted in its letter that the law states the Fed may not “require, or accord greater legal status or effect to, the implementation or application of a specific technology or technical specification for performing the functions of creating, storing, generating, receiving, communicating, or authenticating electronic records or electronic signatures.” In other words, the reg cannot favor Internet over Intranet technology. “NAFCU believes it is vitally important that regulations implemented in the arena of electronic communications remain flexible in order to encourage continued expansion of electronic commerce as intended by the E-Sign Act,” NAFCU’s letter signed by President and CEO Fred Becker read. The trade associations had several specific problems with the prohibition of Intranet communications as a means of providing electronic disclosures. Both groups commented that creating and maintaining an e-mail database, particularly obtaining members’ e-mail addresses who do not use their e-mail for communications with their credit union and keeping up with constantly changing addresses. CUNA pointed out that especially military sponsored credit unions would have difficulty with the e-mail address requirement. Many of these credit unions’ members may be located all over the world and may not have access to their personal e-mail account. Additionally, NAFCU said that Intranet systems not only provide better security of the consumers’ information, but also the financial institution would have a better idea of whether the intended recipients are actually receiving the disclosures. The financial institutions are not required to confirm whether the notices were actually received under the law or regulation. In other comments, CUNA wrote in their comment letter that in order for the consumer to “reasonably demonstrate” that they can access electronic disclosures, the consumer should only have to provide the bank with an e-mail address or access the institution’s Web site. CUNA also suggested that the Fed provide additional guidance, including examples, on what constitutes a “material risk” that a consumer may no longer be able to access the electronically disclosed information. The trade association also urged periodic review of the reg by the agency to determine when to exempt disclosures as permitted by the E-Sign Act. NAFCU pointed out that if a member obtained a loan online, but did not agree to electronic disclosures, it could delay their access to the loan under the interim rule. Yet if applying by phone, mail, or fax, there would be no delay. NAFCU said this could discourage the use of electronic means. Also, under the interim rule, if e-mails are sent notifying the consumer of a disclosure on the Web site, the e-mail must identify which account it applies to. For members with several accounts, this could be confusing if not impossible without including the account number, NAFCU wrote. [email protected]