WASHINGTON—NAFCU is asking the CFPB to provide more guidance on Regulation E, saying it finds “deeply troubling” recent reports that suggest the CFPB may expand related liabilities to further encompass fraudulently induced transfers initiated by a consumer.
“Credit unions are committed to providing safe, affordable, and fast payments to all their members, while also ensuring compliance with Regulation E. However, such a commitment depends on a fair and stable regulatory environment where the plain language of the EFTA does not expand beyond what was originally envisioned by Congress,” wrote NAFCU President and CEO Dan Berger in a letter to the CFPB. “Further expansion of credit union liability under new guidance would magnify this risk beyond reasonable limits and have far reaching consequences.”
Berger stated that in the long term an expansive interpretation of Regulation E could magnify exposure to fraud and curtail investments designed to help reach underserved communities, such as investments in brick-and-mortar branches.
“Credit unions have made strides improving underserved and rural branch access, growing branch presence by 2.4% between 2012 and 2021, but these gains could be reversed if budgetary resources are reallocated to cover new forms of fraud enabled by novel regulatory interpretations,” Berger told the CFPB.
Recommendation Made
Berger recommended that instead of issuing new interpretations of Regulation E or its commentary, the CFPB should redirect its focus to investigating technologies and solutions that can help prevent fraud before it occurs.
“Technical and educational resources would also ensure that efforts to support real time payments, such as FedNow, are not abandoned out of fear that financial institution liability under Regulation E liability might exceed manageable limits,” added Berger.
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