As you may know, on September 17, 2024 the CFPB issued a circular regarding ‘Improper Overdraft Opt-In Practices’. This circular outlines the CFPB’s guidance related to obtaining Reg E opt-in from consumers. In short, it represents a significant change to the interpretation of Reg E Opt-In requirements.
Since Reg E requirements took effect on July 1, 2010, the practice for obtaining opt-in outlined by Strunk has passed muster with every regulatory authority including the FDIC, OCC, Fed, and NCUA. Over that entire period of time – over 14 years – we have never had a client cited for not properly obtaining Reg E opt-in. The foundation of this practice was essentially twofold – FIs were to provide the consumer with the Reg E A-9 form and then follow up with a notice produced from ODP Manager sent to the consumer confirming their opt-in and once again telling them they have the option to opt back out. The A-9 was to be provided to every consumer upon account opening or request to opt-in. The confirmation notice history is maintained in ODP Manager.
Evidently, after 14 years, the CFPB has determined that in order to provide evidence that the confirmation was obtained from the consumer, the A-9 form must be signed or initialed. They also outline that opt-ins provided over the telephone must be recorded and opt-ins obtained online or via mobile app must be stored and signed with an electronic signature. The specific language in the CFPB circular is as follows:
- For consumers who opt into covered overdraft services in person or by postal mail, a copy of a form signed or initialed by the consumer indicating the consumer’s affirmative consent to opting into covered overdraft services would constitute evidence of consumer consent to enrollment.
- For consumers who opt into covered overdraft services over the phone, a recording of the phone call in which the consumer elected to opt into covered overdraft services would constitute evidence of consumer consent to enrollment.
- For consumers who opt into covered overdraft services online or through a mobile app, a securely stored and unalterable “electronic signature” as defined in the E-Sign Act (15 U.S.C. 7006(5)) conclusively demonstrating the specific consumer’s action to affirmatively opt in and the date that the consumer opted in would constitute evidence of consumer consent to enrollment.
Although the CFPB technically only has supervisory authority over FIs with assets in excess of $10B, and no regulator has the authority to issue new regulations, in the current environment it is our view that it is highly likely that each of the respective regulatory authorities for financial institutions will adopt this same ‘guidance’ and administer their examinations accordingly. That being the case, we urge you to adopt the approach outlined in the three bullets above when obtaining consumer opt-in for Reg E. Specifically, what this means is:
- For consumers who opt in via postal mail or in person – have them sign or initial the A-9 form:
- For consumers who opt in via telephone, make sure your calls are recorded, and those recordings are retained.
- For consumers who opt in online or via mobile device, store the transaction along with electronic signature. Strunk supports an online opt-in process, which can be tracked within ODP Manager. Please contact us if you would like us to configure that capability for your institution.
With respect to existing consumer account holders, the same rules all apply. So, if you do not have the physical evidence outlined above for consumers who currently are coded as opted in for Reg E, you must contact those consumers to obtain the affirmative consent outlined above. If those consumers do not provide the necessary confirmation, we would recommend removing their Reg E opt in from your system and discontinue approving their Reg E overdraft transactions and charging fees.
