Question & Answer

Question: We are about to send out our annual Reg E disclosure. Do we have to send it out separate with the statement of account or can we include other stuffers in the envelope? We'd like to do a loan promotion by putting it in the same envelope.

Answer: Section 205.7, Initial Disclosure of Terms and Conditions, of Regulation E (Electronic Fund Transfers Act) says that at the time a consumer contracts for an electronic fund transfer (EFT) service, or before the first EFT is made involving a consumer's account, a financial institution shall disclose to the consumer, in a readily understandable written statement that the consumer can keep, all the terms and conditions of the EFT service. It goes on to list all those terms and conditions.

Section 205.8 of Reg E says that if you are making a change in terms, you shall mail or deliver a written notice to the consumer "at least 21 days before the effective date of any change...if the change would result in increased fees or charges, increased liability for the consumer, etc." It does not say, however, that you have to mail the notice all by itself.

No requirement in Reg E specifies that the initial or the subsequent disclosure has to be mailed alone or cannot be mailed with other material.

Reg E does not say, as does Regulation CC in its section 229.17 "The disclosure...may not be included in a mailing of promotional material, such as a solicitation for a new product or service..." Reg CC goes on to say if the statement is enclosed, you must direct the customer's attention to the schedule by the use of an insert or a letter.

BANKERS' HOTLINE spoke to government regulators who indicated that if you are going to mail your annual disclosure with other material or promotions, the most conservative thing to do is to include a letter drawing attention to the disclosure. Your marketing people can certainly find a way to do this in a clever and acceptable way.

The commentary (with questions and answers) to the two sections of Regulation E referred to above suggests that if you are printing the disclosure as part of your periodic statement, there is no need to send a subsequent annual disclosure.

Reg E, Section 6-422.7, Ques. 8-7 reads: "An institution must either provide its customers with the full error-resolution notice annually or include a short-form notice on or with each periodic statement. If an institution does not send periodic statements to certain EFT customers, how should it comply with this requirement?"

Answer: "It must send the full error-resolution notice annually. (Section 205.8(b))"Reg E, 6-422.6, Ques. 8-6 reads: "May an institution give notice of a change in terms by sending copies of its revised disclosure statement?"

Answer: "Yes, provided attention is directed to the change (for example, in a cover letter referencing the changed term). No specific form or wording is required. The notice may appear on a periodic statement. (Section 205.8(a))"

(Ed.Note-Our thanks to Phil Farley, FRB of Philadelphia, for his assistance and information on Reg E)

Copyright © 1991 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 2, No. 8, 10/91