WASHINGTON—NAFCU and CUNA joined with several other trade associations to call on the Senate to modernize the Electronic Signatures in Global and National Commerce (E-SIGN) Act.
Separately, NAFCU has also sent a letter to the new FASB chairman, outlining its concerns related to CECL.
In the letter on E-SIGN, the signatories stressed that financial services and business have drastically transformed since it was enacted 20 years ago and consumers' internet access and literacy have significantly increased.
The letter to Senate Majority Leader Mitch McConnell (R-KY) and Minority Leader Chuck Schumer (D-NY), Senate Commerce Committee Chairman Roger Wicker (R-MS) and Committee Ranking Member Maria Cantwell (D-WA) urges support for including the E-SIGN Modernization Act, S. 4159, in the Senate's Phase 4 coronavirus relief package.
The groups note how the coronavirus pandemic has led Americans to use digital platforms to monitor and manage their finances, but E-SIGN requirements have hindered some people's ability to do so.
Requirement is ‘Challenging’
"Since the beginning of the current crisis, companies large and small have found compliance with the E-SIGN reasonable demonstration requirement…challenging," the letter states. "Financial institutions have faced hurdles to quickly implement loan modifications, transfer balances, complete service requests begun on paper or over the phone, or fulfill requests from displaced customers for access to digital services."
S. 4159 would specifically remove the unwieldy requirement that consumers prove they can access documents electronically before they can agree to receive digital versions. Instead, the bill would allow documents to be sent electronically once the consumer is provided with disclosure information and consents to receive them via digital means, NAFCU said.
The letter further argues the E-SIGN Act's reasonable demonstration provision is an outdated feature and suggests a preference for paper documents rather than technologies that are now widely available. The groups cite comments from lawmakers when E-SIGN was originally passed that express concerns about it becoming overly burdensome and outdated.
In light of the coronavirus pandemic, NAFCU has urged the CFPB to modernize electronic disclosure and signature-related provisions of all its regulations, and also recommended legislative amendments to update the E-SIGN Act.
The Bureau last month said it will take a flexible approach to its supervisory and enforcement practices related to electronic credit card disclosures amid the coronavirus pandemic by not citing violations or bringing an enforcement action against a card issuer "that during a phone call does not obtain a consumer's e-sign consent to electronic provision of the written disclosures required by Regulation Z, so long as the issuer during the phone call obtains both the consumer's oral consent to electronic delivery of the written disclosures and oral affirmation of his or her ability to access and review the electronic written disclosures."
Letter to FASB
Meanwhile, in a separate letter to new FASB Chairman Richard Jones, NAFCU President and CEO Dan Berger outlined the association's concerns with the impact the current expected credit loss (CECL) standard will have on credit unions and urging an exemption for the industry.
In the letter, Berger wrote:
- "Although NAFCU appreciates the one-year delay of the adoption of CECL for non-public business entities adopted in October 2019, the COVID-19 pandemic and current economic crisis have highlighted apprehensions about the appropriateness and efficacy of CECL implementation for not-for-profit, member-owned cooperative financial institutions.”
- "As such, credit unions are not publicly traded and do not have equity investors. The CECL standard was intended to better protect such investors and preserve the health of the financial system. The National Credit Union Administration (NCUA) ensures the safety and soundness of credit unions and guarantees that the type of risks that led to the 2008 financial crisis, which credit unions had no part in, are not present in the credit union system.
- "Given the unique nature of credit unions as non-public financial institutions, FASB should exempt credit unions from the CECL standard.”
Additional Concerns
Berger also cited concerns about procyclicality and the standard’s propensity to exacerbate capital and liquidity issues during economic downturns as well as lawmakers’ calls for additional studies on the impact of CECL.
"Given the high degree of economic uncertainty and credit unions’ conservative tendencies, CECL’s forecasting requirement is likely to lead to upwardly-biased loss estimates," Berger argued. "This could severely tighten credit conditions and reduce access to credit, which could disproportionately affect low- and moderate-income individuals most impacted by the COVID-19 pandemic. This not only runs counter to CECL’s goal of establishing economic stability but could also amplify and extend the impacts of the current economic crisis."