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However, Section 1026.12(d)(2) permits financial
institutions to obtain a security interest in deposited
funds as long as the security interest is affirmatively
agreed to by the consumer and it is disclosed initially.
Stated another way, the consumer must be aware that
the granting of a security interest in deposited funds
is a condition for the credit card and the consumer
must specifically intend to grant the security interest in
deposited funds. Any of the following can be considered
indicators of a consumer’s awareness and intent deemed
sufficient:
• Separate signature or initials on the agreement
indicating a security interest is being given.
• Placement of the security agreement on a separate
page, or otherwise separate security interest
provisions from other contract and disclosure
provisions.
• Reference to a specific amount of deposited funds or
to a specific deposit account number.
Often, we find several situations can lead to institutions
violating the Regulation Z offset rule. In some cases,
staff fail to instruct consumers to initial the agreement
in the appropriate location or forget to follow up with
a consumer when they notice it is missing. In other
situations, incorrect or outdated forms are used, and
consequently, the necessary security provisions are
missing from the loan documents. Your institution’s
compliance monitoring and testing should include
periodically spot checking for the necessary language on
forms, as well as verifying staff are trained on obtaining
the required initials in the correct places.
FCRA Dispute Investigations
CFPB examiners noted financial institutions were not
completing investigations into notices of disputes from
credit reporting companies (CRC) in a timely fashion.
The Fair Credit Reporting Act (FCRA) requires financial
institutions to complete investigations of disputes
normally 30 days from the date the CRC receives a
dispute or up to 45 days in certain circumstances.
Some were not completing the investigation within
the timeframe, while others were not conducting
investigations at all and failing to respond to the CRC.
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In some instances, financial institutions were not
reporting to all applicable CRCs, updates or corrections
to information found to be incomplete or inaccurate
following a dispute investigation. FCRA requires if an
institution’s dispute investigation finds information is
incomplete or inaccurate, they must report the results not
only to the CRC that sent the dispute to the them, but
also to all nationwide CRCs to which they provided the
information.
Financial institutions also, at times, did not implement
reasonable policies and procedures regarding the
accuracy and integrity of deposit account information
it furnished to nationwide specialty CRCs. The policies
and procedures were not appropriate to the nature, size,
complexity and scope of its activities. There were also
instances of no policies and procedures for training,
monitoring, or conducting internal audits regarding a
business unit’s responsibilities to forward disputes of
furnished information. Regulation V, which implements
FCRA, requires financial institutions to establish and
implement reasonable written policies and procedures
regarding the accuracy and integrity of the information
relating to consumers it furnishes to a CRC. Regulation
V also requires them to consider and incorporate,
as appropriate, guidelines found in Appendix E. One
of the guidelines in Appendix E states their policies
and procedures should incorporate, as appropriate,
reasonable investigations of consumer disputes and
take appropriate action based on the outcome of
investigations.
FCRA dispute compliance is a thorn in the side of
many compliance departments. Getting it right is more
important than ever, as the information your financial
institution provides to CRCs has significant consequences
to consumers. The CFPB is making it known they
have, and will continue, to closely scrutinize financial
institution’s duties as furnishers of information. When
disputes arise, financial institutions are on notice that
compliance with FCRA and Regulation V are not be taken
lightly. lll