Credit unions succeed by attracting, serving, and retaining their members. To level the banking playing field and offer competitive services, credit unions spend millions of dollars each year implementing the latest financial technology solutions to better serve their members and attract new members for continued growth. The need to accomplish these goals opens new doors for technology vendors to offer their innovative services to credit unions seeking an edge over the competition. This edge, however, is where credit unions can sometimes venture down a risky road with vendors looking to make a sale.

Let's take eStatements, for example. A recent trend rising within the industry shows credit unions automatically “opting-in” all their online banking members to eStatements instead of the traditional “members opting-in” method. Some eStatement providers openly promote this auto opt-in process because it can immediately save their credit union clients thousands of dollars eliminating hard copy statement processing and postage costs. Albeit true, it's a risky road to travel.

Initially, it's risky for credit unions to provide a service to members who may not be interested. The eStatements default or auto opt-in method can be intrusive to members who may not want the service, increasing their workload to opt-out and return to their original statement delivery. The whole point of online services calls for convenience and efficiency, especially for the member experience. Credit unions run the risk of annoying members with default services they don't want. But the auto opt-in numbers for eStatements creates an all-too-attractive picture for credit unions from a financial standpoint–which is the vendors' lure. eStatement Auto Opt-in Lure

On average, an eStatement costs about 65% less to deliver than a print statement. Along with these cost savings, vendors promoting the auto opt-in method can pitch higher member adoption rates for the credit union, compared to other vendors' traditional opt-in approaches. So accelerated adoption rate possibilities can be very appealing to a credit union with the byproduct of accelerated cost reduction potential. Credit unions that pursue this approach, however, may not realize the risk. If an eStatement vendor is saying that it's OK, surely it must be OK, right?

Not necessarily. Many credit unions don't have a dedicated compliance person on staff with the available time to investigate each regulation thoroughly. There are usually several staff members who wear many hats at a credit union–compliance being one of them. Before embarking on any new business process, such as opt-in vs. opt-out for eStatements, it's important to understand the implications from a legal standpoint. A Federal Look

Based on the Consumer Consent Provision analysis by the Federal Trade Commission and the Department of Commerce, “Section 101(c)(1) of the Act provides that information required by law to be in writing can be made available electronically to a consumer only if he or she affirmatively consents to receive the information electronically and the business clearly and conspicuously discloses specified information to the consumer before obtaining his or her consent.”

To paraphrase, eStatements can only be delivered as a paper statement replacement if the member has given affirmative consent first. Affirmative consent equals, “Yes, I want eStatements.” What, many times, is being advocated by a vendor is negative consent, which equals, “No, I don't want eStatements.” According to the Consumer Consent Provision, the consumer has to “consent electronically or confirm his or her consent electronically, in a manner that reasonably demonstrates that the consumer can access information in the electronic form that will be used to provide the information that is the subject of the consent.” In other words, eStatements can only be delivered as a paper statement replacement if members give their affirmative consent online, to prove that they have the means to get online to access those eStatements. Setting members up by default (opt-out approach) does not allow them to demonstrate that they can get online to access eStatements. Furthermore, there are necessary components of the consent process that require the member first be made aware of:

o The right to request any document in paper form at any time.

o The procedures for making such a request for a print document, and any applicable fees.

o The right to withdraw consent and go back to paper.

o The procedures to withdraw consent for the eStatement service, and any conditions, consequences, or fees of such withdrawal.

o The procedures to update consumer contact information electronically for the application.

o The scope of which types of documents are included in their consent.

o Listing of any hardware/software requirements for accessing the documents.

If credit unions do not follow the federal guidelines, they may be subject to adverse action by their auditors for noncompliance. This action may include: o Letter of Opinion — This document states what the auditors think the credit union needs to do in relation to its current practice. o DOR (Document of Resolution) — This document shows auditors identifying specific items that do not adequately comply with the regulations and need to be corrected. The credit union would likely have an expense to rectify the issue, such as going back to contact all those members and obtain adequate consent after the fact. As mentioned earlier, and just as important, credit unions may also anger some members in the process. How does it serve a member well to drive them into a delivery channel that they didn't ask for and may not want? And then make them do extra work after the fact to get back to their original statement delivery method if they didn't want to change? If members choose to file a complaint with state regulators regarding this opt-out practice, that would raise the issue for examination by the state regulators.

Credit unions should approach new technology offerings with caution, reviewing and researching any and all new business practices from a compliance/regulatory standpoint. Keeping pace with established banks by implementing the latest technology services can sometimes be an expensive challenge, but keeping between the legal lines with these products shouldn't be. There are reputable industry vendors that are cognizant of the regulations and willing to help credit unions stay between the legal lines and on the road to providing better services for those members who opt-in for them.