Independent Banker - February 2019 - 33

Next: Why leaders should keep up with digital developments
TILA promotes the informed use of consumer
credit by requiring disclosures about terms and
cost. Credit might be a single-extension, a closedend
loan or an open-end line of credit for which
recurring transactions are expected. Funds for
consumer credit transactions create a debt that
the consumer must then repay, and may include
fees and interest.
Initial disclosures
Disclosures under EFTA must be clear and readily
understandable, in writing and in a form the
consumer may keep, though the disclosures may
be provided to the consumer in electronic form
under certain circumstances. Initial disclosures
are required at the time a consumer contracts
for an EFT service or before the first EFT is made
involving the consumer's account.
TILA disclosures are specific to the type of
credit and also must be clear, conspicuous and,
generally, in a form the consumer can keep, but
there are exceptions. Typically, closed-end credit
disclosures must be made at or before loan closing,
and initial open-end credit disclosures are
required before the first transaction is made
under the credit plan.
Subsequent disclosures
Disclosures made after the credit account is
opened or after an EFT service is initiated commonly
include periodic statement disclosures,
receipts at ATMs and change-in-terms disclosures.
Subsequent disclosure requirements are specific,
and credit disclosures vary depending on the type
of credit. Special rules apply to credit cards.
Quick stat
Resolving errors
Consumers have the right to dispute erroneous
or unauthorized transactions. EFT offers a consumer
the right to error resolution, and open-end
consumer credit offers consumers a process to
claim billing errors. While EFT error resolution
and billing error resolution for consumer credit
are similar, each requires a specific process and
recordkeeping. TILA does not outline a formal
process for disputing errors on closed-end credit
accounts, but creditors have a responsibility to
ensure accounts are accurate and function as
disclosed. Failure to do so would likely violate
contract provisions and the Unfair, Deceptive,
111.1B
card payments
were made by
U.S. consumers
in 2016 with a
value of $5.98
trillion
Source: 2017 Federal
Reserve Payments Study
For community banks,
the keys are to know
what you are dealing
with and apply the
right rules.
or Abusive Acts or Practices Act (UDAAP). In
April 2019, new amendments to EFTA and
TILA become effective that modify rules for prepaid
accounts.
If overpayments on a credit account create a
credit balance, TILA requires corrective action.
The guidance is provided for open-end and
closed-end account credit balances.
Consumer liability
Generally, consumers have limited liability for
unauthorized or erroneous transactions, whether
they are EFTs or credit transactions. The EFTA
stipulates a limit on consumers' liability under
federal law, and both EFTA and TILA require a
specific process of consumers and financial institutions
to limit liability and protect the bank.
Credit card companies and some states also have
limits on consumers' liability, and they may be
more protective.
For consumer credit cards, TILA sets a dollar
ceiling and the procedures required of consumers
to limit liability. For open-end credit that is
not under a credit card account, TILA does not
set a dollar limit for unauthorized or erroneous
transactions. However, the consumer may have
the right to withhold a disputed amount pending
resolution.
Plastic; transactions conducted via telephone,
mobile phone or computer; point of sale; prepaid
payment devices ... the list expands exponentially
with electronic and digital facilities. For community
banks, the keys are to know what you are
dealing with and apply the right rules.
Mary Thorson Wright, a former Federal Reserve
managing examiner and compliance consultant, is
a financial writer in Virginia.
independentbanker.org Q 33
http://www.independentbanker.org
Independent Banker - February 2019

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