With the CFPB flexing its regulatory muscles, it's no surprise that collectors are making compliance a priority.
Two major regulations are Reg E and its impact on recurring payments; and E-Sign, which covers digital signatures.
Reg E covers payments known as 'electronic funds transactions' but with the increasing strictness of the CFPB there has been confusion among collectors as to what type of transaction is covered by Reg E, as well as how it applies to recurring payments.
Based on some recent input we received from industry experts, here are some key takeaways for collectors.
At a recent web seminar that we hosted, Charity Olson, managing attorney at Olson Law Group, said a good rule of thumb for Reg E is: Is the payment being taken now, or fairly contemporaneously? And is it being processed electronically? If both of those are met you've got a transaction covered by Reg E.
A specific pain point highlighted is whether debit cards being used as credit cards are covered by Reg E. Our web panel agreed that if funds are being collected directly from a deposit account, then Reg E applies. It also urged collectors to demonstrate best practice by training agents to establish where funds are being taken from at the point of processing.
An attendee poll seems to reflect the industry polarity around Regulation E – just over half – 54% said they'd made changes to accommodate Reg E in recurring payments while 35% said they'd taken no measures to adjust to guidelines.
Another regulation, E-Sign, is ready to misinterpret.
E-Sign is the replacement of wet ink signatures on paper documents with an electronic alternative, allowing records to be kept electronically. Collectors must comply with a long list of to-dos involving disclosure of consumer rights and visibility. But understanding ambiguous guidelines like E-Sign can be difficult, and companies without vast financial or human resources don't want to become the test case for any litigation.
There are various ways that an entity can get this wrong, unwittingly and without intending to. The industry is at an intersection of regulatory oversight, new payment technologies and human error. That is a perfect storm for litigation,” Olson said.
With the CFPB not explicitly setting out how these disclosures should be made and presented, collectors are left to seek legal best practice advice or consult guidelines laid down by NACHA.
The panel echoed that collectors, attorneys and compliance specialists have all been left debating the best practice around E-Sign but agreed that outsourcing this to specialist solutions providers at least proves dedication to comply with the act.
Dave Yohe is director of corporate marketing at BillingTree.