Question & Answer

Question: Our bank wants to start an electronic banking product. I need to find out what compliance rules we should consider. Do you have any advice? Where should I be looking?

Answer: First, congratulations on stepping into the new world of electronic banking. There is some guidance now available, but the reality is that you are being a pioneer and you are out on the frontier. The rules of compliance will follow, but right now you have to find your own path.

You should follow all of the principles in the existing compliance regulations. Essentially, this means translating rules designed for paper transactions into concepts for an electronic environment. This gives you a chance to be creative.

There are a couple of rules to follow. First, be sure that your electronic disclosures and other information contains everything that is required on paper. For example, if you give an early Truth in Lending disclosure over the Internet, it should be complete. And don't forget things like the fair lending logo.

Second, follow the timing rules. Information that should be given with an application, such as ARM program disclosures, should be given as part of an Internet application procedure. If you are following with three-day disclosures by mail, be sure to measure those three days from the date of the electronic application and have a system for responding within the required time frames.

Third, follow any clear and conspicuous rules, including readability and placement.

Finally, watch for rules on electronic banking. They may come from different sources. First, the Federal Reserve Board may soon issue revisions to its existing consumer protection regulations to provide more specific guidance on electronic disclosures. Second, there is a bill in Congress that would apply principles for electronic transactions to all federal regulations.

Copyright © 2000 Compliance Action. Originally appeared in Compliance Action, Vol. 5, No. 3, 3/00