WASHINGTON–A consumer group is blasting new guidance from the CFPB the agency said is designed to provide temporary, targeted flexibility during the coronavirus pandemic for credit card issuers when it comes to electronic provision of certain disclosures under truth-in-lending laws that are required to be provided in writing.
Under the “guise of providing relief,” the CFPB will undermine critical consumer protections in federal law that ensure that consumers receive important disclosures about credit card transactions in writing,” said the National Consumer Law Center.
“The guidance, supposedly issued to provide consumers relief to enable credit cards to be provided more quickly during the COVID-19 pandemic, actually only provides relief to lenders while undermining protections for consumers,” the NCLC said. “The guidance poses a serious risk to consumers’ right to receive important written disclosures, including their monthly credit card bills.”
The NCLC further argued the CFPB guidance allows lenders to “take shortcuts when obtaining a consumer’s consent over the telephone” to electronic disclosures in order open a new account, offer a balance transfer, or provide a temporary APR or fee reduction for an existing account.
Skipping a Step
“Yet, federal law (the E-Sign Act) requires that before a lender can replace a written disclosure with an electronic record, the lender must obtain proof that the consumer can actually receive and access electronic disclosures,” the NCLC said. “This requirement, to ensure that consumers will actually be able to access and save electronic records containing important information through different electronic mechanisms, can be satisfied simply by having the consumer wait for an email and click on a link. Yet, the new CFPB guidance skips that legally mandated step and allows lenders to simply get the consumer’s agreement over the telephone to electronic disclosures. The guidance does not even ensure that the lender has not made a mistake in (or made up) the consumer’s email address. Consumers may not be able to see or confirm the terms they have been offered.”
Contradiction Cited
The reason given by the CFPB for this move was to allow consumers “to obtain relief quickly,” the NCLC observed, but Chi Chi Wu, an attorney with the organization asked, “What lender is issuing a brand new credit card to a consumer who needs it so quickly that they can’t wait three days for a mailed disclosure, or even a few minutes to receive an email and click a link? After all, the lender still needs to mail the actual credit card to the consumer,” said Chi Chi Wu, attorney at the National Consumer Law Center.
The group also expressed concern that the same shortcuts would be used to obtain a consumer’s consent to monthly credit card bills.