When Can My Bank Cease Compliance with the Remittance Transfer Rule?

By Leslie Callaway, CRCM, CAFP; Mark Kruhm, CRCM, CAFP; and Rhonda Castaneda, CRCM

Q In May, the Consumer Financial Protection Bureau amended its remittance transfer rule, changing the definition of remittance transfer provider to only include those persons who make more than 500 remittance transfers a year, an increase from the previous 100 per year.

As of mid-2020, our bank had sent less than 500 but more than 100 remittance transfers. If the bank is still below the 500 threshold as of the effective date of July 21, 2020, on what date can the bank cease compliance with the rule?

A Technically, the bank may cease complying on July 21 because it is under the new threshold. However, when evaluating whether to discontinue compliance, the bank should consider the likelihood that it might later exceed the 500 threshold, in which case it would have to again comply (within six months). In addition, banks should consider the customer relations impact of not providing disclosures, especially if the bank’s competition continues to provide them. (Answer provided July 2020.)

Q I am seeking guidance as to whether Fair Credit Reporting Act adverse action notices related to deposit products must include a “confidence” score.

My bank is contemplating implementing a new process for screening applicants for deposit accounts which will utilize a collection of screening systems including Early Warning Systems. EWS will produce a “confidence” score based on data that includes deposit account records related to losses, charge offs, account abuse, collections, merchant data, dispute records and payment status (settled, unpaid, sold, discharged in bankruptcy). If the applicant fails this screen, the system alerts the bank to provide an adverse action notice.

Under §615(a)(2) of FCRA adverse action notices must include any credit score used and other related information. However, the vendor’s sample adverse action does not contain the score information. The vendor says that the score information is not required. Can you confirm?

A The question is whether the score generated is a “credit score” as defined by FCRA. Section 609(f)(2)(a) of FCRA defines credit score as a “numerical value or a categorization derived from a statistical tool or modeling system used by a person who makes or arranges a loan to predict the likelihood of certain credit behaviors. . . .” (Emphasis added.)(§609(f)(2)(a).)

The question is not what is the purpose for which a particular bank is using the score (in this case, deposit account opening), but whether others use it to make credit decisions. If others use the score for credit decisions, it must be included in the adverse action notice even if when it is being used for non-credit decisions.

Based on your description, it appears that the score is not used for credit decisions, and so is not a credit score that must be disclosed in the adverse action notice. The bank should verify with the vendor, and, if it is used for credit decisions, include it in the notice. (Answer provided July 2020.)

Q My bank offers credit cards with an introductory rate for a set period after which the rate will be variable based on a stated index and margin. Given the fact that the bank cannot know what the rate will be until after the introductory period, may the bank provide in the account opening disclosures the introductory rate and a range of rates, which will apply after the introductory period?

A No. Per §1026.6(b)(2)(i)(B) of Regulation Z, “If the initial rate is an introductory rate . . . the creditor must disclose the rate that would otherwise apply to the account. . . . In a variable-rate account, the creditor must disclose a rate based on the applicable index or formula in accordance with the accuracy requirements of paragraph (b)(4)(ii)(G) of this section.” Paragraph (b)(5)(ii)(G) states that a rate is accurate if it is as of a specified date and the rate was in effect within 30 days preceding the date of the disclosures. Therefore, for purposes of the account opening disclosures, both the introductory rate as well as a non-introductory rate should be provided. (Answer provided July 2020.)

Answers are provided by Leslie Callaway, CRCM, CAFP, senior director of compliance outreach and development; Mark Kruhm, CRCM, CAFP, senior compliance analyst; and Rhonda Castaneda, CRCM, senior compliance analyst, ABA Regulatory Policy and Compliance. Answers do not provide, nor are they intended to substitute for, professional legal advice. Answers were current as of the response date shown at the end of each item.