Limited Open-End Credit eSign Exemption Due to COVID-19

The Consumer Financial Protection bureau released a Statement on Supervisory and Enforcement Practices Regarding Electronic Credit Card Disclosures in Light of the COVID-19 Pandemic. This is described as a temporary and targeted flexibility for credit card issuers during this pandemic regarding the electronic provision of certain disclosures required to be in writing.

Regulation Z generally requires credit card issuers to provide disclosures to consumers in writing. The E-Sign Act allows the disclosure to be provided electronically, subject to several requirements, including:

  • Obtaining a consumer’s affirmative consent to receiving electronic disclosures.
  • Providing certain disclosures to the consumer prior to obtaining the consumer’s consent.
  • Demonstrable consent of receipt of all of the above.

Basically, the Statement allows card issuers to bypass the E-Sign Act for open-end, non-dwelling secured credit cards with regards to phone interactions where a card issuer wants to open a new credit card account for a consumer, provide certain temporary reductions in APRs or fees applicable to an existing account, or offer a low-rate balance transfer, so long as the issuer during the phone call obtains:

  • 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.

The Bureau clearly clarified that the existence of a recording would not satisfy these elements – there must be actual acknowledgement by the customer; however, a recording can be used to memorialize the affirmations.

The Bureau expects issuers will take reasonable steps during the phone call to verify a consumer’s electronic contact information.

  • If a consumer provides an issuer with his or her email address, the Bureau expects that the issuer will confirm the correctness of the consumer’s email address, such as by repeating it back to the customer and getting a positive acknowledgement.
  • If an issuer already has an email address for the consumer on file, the issuer is expected to clearly and understandably confirm that on-file email address to the consumer so that the consumer can verify its accuracy.

Also, the Statement made it a point to clarify the Bureau does not intend to apply this flexibility to other requirements of Regulation Z.

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