Electronic Mortgage Statements

By David A. Wolfe, Attorney

Paper billing is a predictable expense and credit unions are understandably eager to go paperless for their member communication, however, many members cling to traditional payment methods.  Online banking and bill pay initiatives require a significant investment, but as credit unions switch to electronic statements, they are experiencing increased traffic to their websites and immediate, hard cost reductions. 

The E-SIGN Act, enacted in June 2000, provides a general rule for validity of electronic records and allows credit unions to send customers electronic mortgage statements where the member has affirmatively consented to receiving these statements in electronic form.  The statute requires credit unions to provide members clear and conspicuous statements of their right to have the record made available on paper and the right to withdraw consent, including any conditions, consequences and fees in the event of such withdrawal; whether the consent applies only to the particular transaction that triggered the disclosure; describing the procedures the consumer must use to withdraw consent and to update information needed to contact the consumer electronically; and informing the consumer how they may request a paper copy of a record and whether any fee will be charged for that copy. 

Prior to consenting to the use of an electronic record, under the E-SIGN Act, the credit union must provide the member with a statement of the hardware and software requirements for access to and retention of electronic records. Finally, if the member consents electronically or confirms their consent electronically, it must be in a manner that reasonably demonstrates the member can access information in the same electronic form that will be used to provide the information.  

Pursuant to the Dodd-Frank legislation, the Consumer Financial Protection Bureau, (CFPB), has proposed a new rule to allow credit unions to send electronic mortgage statements if the member consents and the full E-SIGN Act consent process would not be required.  Section 128(f)(2) of the Truth in Lending Act (TILA), provides that periodic statements “may be transmitted in writing or electronically,” and the CFPB’s proposal would allow credit unions to meet this requirement by sending the member an e-mail notification that the statement is available instead of e-mailing the actual statement. The credit union would only have to obtain affirmative consent by the member to receive their periodic mortgage statements and not full compliance with E-SIGN verification procedures.

The CFPB is currently considering public comments, and its final rule is due January 21, 2013.

David is an attorney in the Consumer Collections unit of Weltman, Weinberg & Reis Co., LPA, in the Michigan office. He can be reached at 248.362.6142 and dwolfe@weltman.com.

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