Fed OKs interim rule allowing electronic notices from banks
Thursday, August 19, 1999
The Federal Reserve Board approved on Wednesday an interim rule that could put an end to the monthly bank statement that arrives in the mail, to be replaced by an electronic version.
In a 5-0 vote, the Fed voted to allow banks to send periodic customer account statements in electronic form and proposed a framework for other disclosures to be delivered electronically as well.
For banks, allowing the "fine print" of customer transactions to be delivered by e-mail or on the Web could save money and time. For consumers, electronic delivery could ease paperwork hassles but also raises questions of consumer awareness and possible abuse.
Fed Governor Edward Gramlich described the proposed electronic disclosure rules as an attempt to tread a middle path between competing business and consumer interests.
After the rules were originally proposed in March 1998, banking trade groups said they did not give enough guidance in allowing banks to substitute cheaper electronically delivered materials, and consumer advocacy groups worried about the potential for abuse.
"Overall, the modified proposal tries to balance the various concerns," Gramlich said.
The interim rule, to become effective when published in the Federal Register, broadens the authority for banks to electronically deliver routine periodic account statements and disclosures. Previously, electronic delivery had been limited to disclosures involving electronic fund transfers.
"The board believes that, in addition to reducing paperwork and costs for institutions, the interim rule may benefit many consumers by allowing them to receive their periodic account statements, including required disclosures, more quickly and in a more convenient form," the Fed said.
Other, less routine disclosures, such as account-opening notices and change-in-terms notices, would be addressed by the proposed rules issued for comment Wednesday.
Under the proposal, banks could deliver disclosure information by sending it to an e-mail address specified by the customer or by making it available on the bank's Web site.
Institutions would have to identify what types of disclosures would be affected and the address or location where the disclosures could be found and technical requirements for receiving and retaining the information. They'd also provide a means for customers to respond affirmatively that they've agreed to electronic delivery.
Banks that post disclosure information on their Web sites would have to separately notify customers when the information was posted.
Consumers signed up for electronic delivery would be able to respond in kind. For example, customers could give notice of an error in their account via e-mail, instead of having to send a paper notice.
Some transactions usually done in person would still be required to be approved in writing, such as mortgage loan closings, auto loans and leases and door-to-door credit sales.
The Fed seeks comments on the proposals by Oct. 29.
While the Fed moves ahead with possible rules, Congress could still get involved in the process.
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