Consumer Compliance | FDIC (2024)

Consumer Deposits and Related Activities

Specific areas of focus include the Electronic Fund Transfer Act (EFTA), Expedited Funds Availability Act (EFA Act), Truth in Savings Act (TISA), Garnishments, Remittances, Prepaid Accounts, and Overdrafts.
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• The EFTA is intended to protect individual consumers engaging in electronic fund transfers and remittance transfers. The term “electronic fund transfer” generally refers to a transaction initiated through an electronic terminal, telephone, computer, or magnetic tape that instructs a financial institution either to credit or to debit a consumer’s asset account.
• Regulation CC implements two laws, the EFA Act and the Check Clearing for the 21st Century Act (Check 21). The regulation sets forth the requirements that institutions make funds deposited into transaction accounts available according to specified time schedules and that they disclose their funds availability policies to their customers. It also establishes rules designed to speed the collection and return of checks and electronic checks and describes requirements that affect banks that create or receive substitute checks, including requirements related to consumer disclosures and expedited recredit procedures.
• Regulation DD, which implements the TISA, supports consumers’ efforts to make informed decisions about their accounts at depository institutions through the use of uniform disclosures. The disclosures aid comparison shopping by informing consumers about the fees, annual percentage yield, interest rate, and other terms for deposit accounts. The regulation also includes requirements on the payment of interest, the methods of calculating the balance on which interest is paid, the calculation of the annual percentage yield, and advertising.
• The final joint Garnishment Rule establishes requirements financial institutions must adhere to when receiving garnishment orders to avoid garnishing protected funds.
• The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) established new standards with respect to remittance transfers (monies remitted to foreign countries). Among its requirements, the Dodd-Frank Act mandates remittance transfer providers to disclose the exact exchange rate, the amount of certain fees, and the amount expected to be delivered to the recipient.
• The CFPB issued a final rule to provide comprehensive consumer protections for prepaid accounts via Regulations E and Z. The rule requires tailored provisions governing disclosures, limited liability and error resolution, periodic statements, and adds new requirements regarding the posting of account agreements.
• Over time, institutions have added and/or expanded the types of overdraft payment programs provided to customers. If not properly managed, overdraft programs can have an adverse impact on bank customers and present a potential risk of consumer harm. In an effort to assist FDIC-supervised institutions in identifying, managing, and mitigating risks regarding overdraft payment programs, amendments to certain regulations and guidelines were issued.

Consumer Compliance: Consumer Lending

Reference materials covering regulations, examination manuals, and supervisory resources as they pertain to consumer lending not secured by real property. Specific areas of focus include the Truth in Lending Act (TILA), credit cards, small-dollar loans, student lending, the Fair Debt Collection Practices Act (FDCPA), the Servicemembers Civil Relief Act (SCRA), and the Military Lending Act (MLA).
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• The TILA, implemented by Regulation Z, is intended to ensure that credit terms are disclosed in a meaningful way so consumers can compare credit terms more readily and knowledgeably. In addition to providing a uniform system for disclosures, the TILA protects consumers against inaccurate and unfair credit billing and credit card practices, provides ability to repay requirements and other limitations applicable to credit cards, provides consumers with rescission rights, provides for rate caps on certain dwelling-secured loans, imposes limitations on home equity lines of credit and certain closed-end home mortgages, provides minimum standards for most dwelling-secured loans, and delineates and prohibits unfair or deceptive mortgage lending practices.
• A credit card represents a payment mechanism which facilitates both consumer and commercial business transactions, including purchases and cash advances. A credit card generally operates as a substitute for cash or a check and most often provides an unsecured revolving line of credit. The borrower is required to pay at least part of the card’s outstanding balance each billing cycle, depending on the terms as set forth in the cardholder agreement. As the debt reduces, the available credit increases for accounts in good standing.
• Some small-dollar loan programs are designed for a broad base of customers. Others are targeted to certain markets, such as military customers, employers, low- or moderate-income customers, the underbanked, or customers with a limited or non-existent credit history. The goal of all these programs is to enable insured institutions to better meet community needs while helping consumers avoid, or transition away from, reliance on high-cost debt.
• Many students and their families use federal or private student loans to help pay for education after high school. Federal student loans come from the Department of Education while private student loans are made by a lender, such as a bank, credit union, or other financial institution. Private loans offer variable interest rates, so the interest rate may rise during the life of the loan. These loans also often have fewer options to reduce or postpone payments and less flexible payment options as compared to federal student loans.
• The FDCPA was designed to eliminate abusive, deceptive, and unfair debt collection practices. The federal law also protects reputable debt collectors from unfair competition and encourages consistent state action to protect consumers from abuses in debt collection. The FDCPA, implemented by Regulation F, applies only to the collection of debt incurred by a consumer primarily for personal, family, or household purposes. It does not apply to the collection of corporate debt or to debt for business or agricultural purposes.
• The SCRA was signed into law on December 19, 2003, amending and replacing the Soldiers’ and Sailors’ Civil Relief Act of 1940. The law protects members of the Army, Navy, Air Force, Marine Corps, and Coast Guard, including members of the National Guard, as they enter military service, as well as commissioned officers of the Public Health Service and the National Oceanic and Atmospheric Administration engaged in active service. Some of the benefits accorded servicemembers by the SCRA also extend to servicemembers’ spouses, dependents, and other persons subject to the obligations of servicemembers. Major relief provisions of the SCRA include, among other items, maximum rate of interest on loans, including mortgages, restrictions on residential and motor vehicle purchases and leases rescissions and terminations.
• The MLA is implemented by the Department of Defense (DoD) and protects active duty members of the military, their spouses, and their dependents from certain lending practices. These practices could pose risks for servicemembers and their families, and could pose a threat to military readiness and affect servicemember retention.

Examination Approach

Reference materials covering the FDIC’s Consumer Compliance Examination Manual and supervisory resources as they pertain to consumer compliance examinations conducted by the FDIC. Specific areas of focus include the compliance management system (CMS), ratings, pre-examination planning (PEP), appeals, and consumer harm.

• The FDIC promotes compliance with federal consumer protection laws, fair lending statutes and regulations, and the Community Reinvestment Act through supervisory and outreach programs. The elements of an effective CMS include Board of Directors and management oversight and a consumer compliance program. The FDIC conducts three types of supervisory activities to review an institution’s CMS: consumer compliance examinations, visitations, and investigations.
• The FDIC assigns consumer compliance ratings to institutions it supervises pursuant to the Uniform Interagency Consumer Compliance Rating System (CC Rating System) approved by the Federal Financial Institutions Examination Council (FFIEC) in 2016 and effective on March 31, 2017. The CC Rating System serves as a useful tool for summarizing the consumer compliance position of individual institutions. The CC Rating System is based upon a scale of 1 through 5 in increasing order of supervisory concern.
• The objective of the PEP process is to collect necessary information to understand the institution and the risks of consumer harm prior to the onsite phase of the examination.
• The Guidelines for Appeals of Material Supervisory Determinations describe the types of determinations that are eligible for review and the process by which appeals will be considered and decided. Such guidelines apply to the insured depository institutions that the FDIC supervises (i.e., insured State nonmember banks, insured branches of foreign banks, and state savings associations) and to other insured depository institutions with respect to which the FDIC makes material supervisory determinations.
• The FDIC has a risk-focused consumer compliance examination approach, based on the potential for compliance activities, errors, or omissions to have an adverse impact on banking customers. Consumer harm is an actual or potential injury or loss to a consumer, whether such injury or loss is economically quantifiable (e.g., overcharge) or non-quantifiable (e.g., discouragement). It may be caused by a financial institution’s violation of a federal consumer protection law or regulation directly or through a third party or reflect weaknesses in a financial institution’s CMS.

Consumer Compliance: Mortgage Lending

Reference materials related to mortgage lending, including credit, products, and services related to mortgages. Specific areas of focus include the Truth in Lending Act (TILA), the Ability-to-Repay/Qualified Mortgage (ATR/QM) Rule, the Real Estate Settlement Procedures Act (RESPA), the TILA-RESPA Integrated Disclosure (TRID) Rule, Flood Insurance, Mortgage Servicing Rules, the Home Ownership and Equity Protection Act (HOEPA) Rule, the Homeowners Protection Act, and the Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act.
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• The TILA, implemented by Regulation Z, is intended to ensure that credit terms are disclosed in a meaningful way so consumers can compare credit terms more readily and knowledgeably. In addition to providing a uniform system for disclosures, the TILA protects consumers against inaccurate and unfair credit billing and credit card practices, provides ability to repay requirements and other limitations applicable to credit cards, provides consumers with rescission rights, provides for rate caps on certain dwelling-secured loans, imposes limitations on home equity lines of credit and certain closed-end home mortgages, provides minimum standards for most dwelling secured loans, and delineates and prohibits unfair or deceptive mortgage lending practices.
• In the 2010 Dodd-Frank Act, Congress adopted similar (but not identical) ATR requirements for virtually all closed-end residential mortgage loans. The Dodd-Frank Act also established ATR requirements for classifiable QM loans. In January 2013, the CFPB adopted a rule that implements the ATR/QM provisions of the Dodd-Frank Act.
• The RESPA, implemented by Regulation X, requires lenders, mortgage brokers, or servicers of home loans to provide borrowers with pertinent and timely disclosures regarding the nature and costs of the real estate settlement process. The RESPA also prohibits specific practices, such as kickbacks, and places limitations upon the use of escrow accounts.
• Sections 1098 and 1100A of the Dodd-Frank Act directed the CFPB to publish rules and forms that combine certain disclosures that consumers receive in connection with applying for and closing on a mortgage loan under the TILA (Regulation Z) and the RESPA (Regulation X). Regulations X and Z were amended to establish new disclosure requirements and forms in Regulation Z for most closed-end consumer credit transactions secured by real property. In addition to combining the existing disclosure requirements and implementing new requirements imposed by the Dodd-Frank Act, the final rule provides extensive information regarding compliance with those requirements.
• The National Flood Insurance Program (NFIP) is administered primarily under the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973 (FDPA). The National Flood Insurance Act of 1968 made federally subsidized flood insurance available to owners of improved real estate or mobile homes located in special flood hazard areas (SFHA) if their community participates in the NFIP. The NFIP aims to reduce the impact of flooding by providing affordable insurance to property owners and by encouraging communities to adopt and enforce floodplain management regulations. The FDPA requires federal financial regulatory agencies to adopt regulations prohibiting their institutions from making, increasing, extending or renewing a loan secured by improved real estate or a mobile home located or to be located in an SFHA in a community participating in the NFIP unless the property securing the loan is covered by flood insurance. Flood insurance may be provided through the NFIP or through a private insurance carrier.
• In 2010, the Dodd-Frank Act amended TILA by expanding the scope of Home Ownership and Equity Protection Act (HOEPA) coverage to include purchase-money mortgages and open-end credit plans (i.e., home equity lines of credit, or HELOCs) and amended HOEPA's coverage tests. The Dodd-Frank Act also added new protections for high-cost mortgages, including a requirement that consumers receive homeownership counseling before obtaining a high-cost mortgage. The CFPB's 2013 HOEPA Rule also implemented, via separate amendments to RESPA's Regulation X and TILA's Regulation Z, two additional homeownership counseling-related requirements that may apply to creditors regardless of whether or not they make high-cost mortgages.
• The Homeowners Protection Act of 1998 also known as the “PMI Cancellation Act,” addresses homeowners’ difficulties in canceling private mortgage insurance (PMI) coverage. It establishes provisions for canceling and terminating PMI, establishes disclosure and notification requirements, and requires the return of unearned premiums.
• The SAFE Act mandates a nationwide licensing and registration system for residential mortgage loan originators (MLOs). The objectives of the SAFE Act include aggregating and improving the flow of information to and between regulators, providing increased accountability and tracking of MLOs, enhancing consumer protections, supporting anti-fraud measures, and providing consumers with easily accessible information at no charge regarding the employment history of, and publicly adjudicated disciplinary and enforcement actions against, MLOs.

Privacy and Credit Reporting

Reference materials covering regulations, examination manuals, and supervisory resources as they pertain to consumer privacy and credit reporting topics. Specific areas of focus include the Fair Credit Reporting Act (FCRA), the Fair and Accurate Credit Transactions Act (FACTA), the Telephone Consumer Protection Act (TCPA), and other consumer privacy topics.
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• The FCRA, implemented by Regulation V, contains significant responsibilities for business entities that are consumer reporting agencies and lesser responsibilities for those that are not. Generally, financial institutions are not considered to function as consumer reporting agencies; however, depending on the degree to which their information sharing business practices approximate those of a consumer reporting agency, they can be deemed as such. Financial institutions are subject to a number of different requirements under the FCRA, of which some are contained directly in the statute, while others are contained in regulations issued by the CFPB, Federal Reserve Board (FRB), and/or the Federal Trade Commission (FTC). The applicability of the various sections of the FCRA and implementing regulations depend on an institution’s unique operations.
• The FACTA amends the FCRA, and provides consumers with new tools to help fight identity theft and enhance the accuracy, security, and reliability of their financial information.
• The Federal Communications Commission (FCC) regulations that implement the TCPA provide consumers with options to avoid unwanted telephone solicitations. The regulations address, among other topics, the FCC’s adoption of a national “Do-Not-Call” registry that expands coverage to entities regulated by the Federal Trade Commission (FTC). Under the FCC’s rules, restrictions are placed on telephone solicitation activity and the information that must be made available by telemarketers.
• Title V, Subtitle A of the Gramm-Leach-Bliley Act (GLBA) governs the treatment of nonpublic personal information about consumers by financial institutions. Section 502 of the Subtitle, subject to certain exceptions, prohibits a financial institution from disclosing nonpublic personal information about a consumer to nonaffiliated third parties, unless the institution satisfies various notice and opt-out requirements, and the consumer has not elected to opt out of the disclosure. Section 503 requires the institution to provide notice of its privacy policies and practices to its customers while Section 504 authorizes the issuance of regulations to implement these provisions.

Unfair, Deceptive, or Abusive Acts or Practices

Supervisory resources pertaining to unfair, deceptive, or abusive acts or practices. This includes Unfair or Deceptive Acts or Practices (UDAP) under Section 5 of the Federal Trade Commission Act (FTC Act) as well as Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) pursuant to the Dodd-Frank Act.
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• UDAPs are illegal, can cause significant financial injury to consumers, erode consumer confidence, and can present significant credit and asset quality risks that could undermine the financial soundness of banking organizations. The FTC Act declares that UDAPs affecting commerce are illegal. The banking agencies have authority to enforce the FTC Act for the institutions they supervise. Unlike many consumer protection laws, the FTC Act also applies to transactions with non-consumers and businesses.
• The Dodd-Frank Act makes it unlawful for any covered person or service provider to engage in an “abusive act or practice.” Although abusive acts also may be unfair or deceptive, the legal standards for abusive, unfair, and deceptive each are separate.

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