In its December 2019 Report to Congress, the CFPB indicates lenders, particularly credit card firms, highly comply with standards required by Truth in Lending Act (TILA), Electronic Funds Transfer Act (EFTA), and the Credit CARD Act of 2009.
Compliance managers at credit card banks did their jobs during the reporting period.
The CFPB reports to Congress on enforcement actions. The current report, covering 2017, published on December 19, 2019. Credit card issuers are notably absent from the list.
The agencies charged with enforcement of TILA under 15 U.S.C. § 1607 include:
- Federal Deposit Insurance Corporation (FDIC),
- Federal Reserve Board (FRB)
- National Credit Union Administration (NCUA)
- Office of the Comptroller of the Currency (OCC)
- Federal Trade Commission (FTC)
- Department of Transportation (DOT)
- Farm Credit Administration (FCA)
Truth in Lending
As defined by the CFPB:
“The purposes of TILA include: (1) to assure meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available and avoid the uninformed use of credit, and (2) to protect the consumer against inaccurate and unfair credit billing and credit card practices. 15 U.S.C. § 1601(a). “
Credit card issuers are absent from the list of enforcement actions. The CFPB took action against pawnbrokers, automobile title lenders, and one mortgage servicer for failing to disclose terms accurately or not sending borrowers statements. Additionally, four online lenders failed to disclose proper Annual Percentage Rates. In the one enforcement incident for credit cards, an airline failed to properly refund credits in violation of TILA and Regulation Z.
Mercator ranks TILA and Reg Z compliance as an “A+” for this reporting category and period.
Electronic Funds Transfer Act
CFPB defines this metric as:
“The purpose of EFTA is to provide a basic framework establishing the rights, liabilities, and responsibilities of participants in the electronic fund and remittance transfer systems. The primary objective of EFTA is the provision of individual consumer rights. 15 U.S.C. § 1693(b).”
The scope is broader than TILA and includes debit and prepaid cards.
- Consumers conduct over 80 billion debit, EBT, and prepaid card payments and transact nearly $3 trillion across transaction (non-credit) card accounts annually.
- According to the most recent Federal Reserve Payments Study, debit card volume totaled $2.6 trillion and 69.6 billion transactions in 2017.
- That same year, EBT payments totaled approximately $60 billion and 2.4 billion transactions.
- Further, prepaid card payments totaled $240 billion and 10.7 billion transactions in 2017.
Compliance issues by financial institutions were minimal, with one complaint against a bank for violating overdraft opt-in requirements of EFTA and Reg E. The FTC also took action against dietary supplement marketers, online marketers, and recurring payments from online media groups.
CARD Act of 2009
Credit card issuers shined in their compliance with the CARD Act. In 2017, the FDIC issued six public enforcement actions against one bank and two institutions for unfair and deceptive practices. The Federal Reserve issued a consent order against a state bank for fraudulent practices, and the Office of the Comptroller of the Currency processed four consent orders against two banks for unfair billing practices.
Compliance with fair lending, disclosures, and billing practices by all card issuers in the United States can be ranked no less than an “A,” and we’d say an “A+” is due for credit card issuers. With 480 million active accounts, more than 5.8 billion credit card statements generated, more than 150 billion transactions across all card products, and a throughput of more than $8 trillion on card products, enforcement actions indicate non-compliance was a drop in the ocean of payments.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group