My bank is concerned about the rising incidence of check fraud, including checks being stolen or counterfeited.
Q The bank is planning to discontinue offering check access for new Home Equity Lines of Credit (HELOCs) going forward, but may the bank unilaterally discontinue allowing the use of paper drafts or checks as a means of accessing existing HELOCs?
A No. Section 1026.40(f)(3) of Regulation Z (Truth in Lending Act) generally prohibits changing terms of HELOC plans unless, for example, the changes are insignificant, agreed to by the consumer in writing, or “unequivocally benefit” the consumer throughout the remainder of the plan. Comment 1 to §1026.40(f)(3)(iv) explains that a change that “unequivocally benefits” consumers is offering them “an additional means of access to the line. . . provided the consumer retains the ability to use prior access devices on the original terms.” (emphasis added) Thus, banks may not eliminate the check as an access device for HELOCs. To reduce the risk of check fraud, it should consider other fraud controls.
For more information, contact ABA’s Terry Hollinger.
Please note that this section is not a substitute for professional legal advice.
