We are offering a new savings account where we disclose that we will automatically send electronic account statements unless the customer opts to pay a small fee for paper statements. Some customers have indicated that they don’t want either electronic or paper statements. Can we honor that request? The savings accounts can receive electronic funds transfers.

No, we do not believe that it would be appropriate to honor a customer’s request to not send statements for a deposit account, due to federal and state laws pertaining to electronic fund transfers, as well as checks.

For any account that allows electronic fund transfer (EFT) activity, Regulation E requires monthly periodic statements for each month in which an EFT has occurred and quarterly periodic statements for each quarter in which no EFT has occurred, until the account is “inactive as defined by the institution.” Because your bank is required to send statements, we do not recommend discontinuing the sending of statements, notwithstanding your customers’ requests.

Additionally, under the Uniform Commercial Code (UCC), your bank should be providing periodic statements to avoid liability for fraudulent checks. The UCC provides a safe harbor for banks from liability for unauthorized transactions that the customer fails to report with “reasonable promptness,” which is measured from the time that your institution “sends or makes available” an account statement. To avail yourself of the safe harbor, your bank should continue to provide statements to all customers.

As to providing your statements electronically, Regulation E requires your bank to obtain affirmative consent in compliance with the Electronic Signatures in Global and National Commerce Act (E-Sign Act) prior to sending required disclosures in electronic form. The Illinois Financial Institutions Electronic Documents and Digital Signature Act similarly requires affirmative consent, along with a number of other requirements — such as to provide a clear and conspicuous statement of the right or option to receive non-electronic statements and of the right to withdraw consent to electronic statements.

In this case, you have described a process where you do not obtain your customers’ consent prior to sending email statements; in other words, the customer receives statements electronically unless they opt out. This appears to violate the affirmative consent requirements in the Illinois and federal e-sign laws. Consequently, we recommend revising your practice and your disclosures to ensure that they comply with these laws.

Finally, with respect to charging a fee for paper statements, there could be a chance that an examiner would view the charging of a fee for paper statements to be either discriminatory or a UDAAP violation in cases where customers do not have access to computers or the internet. We are aware that some banks engage in this practice, and we are not aware of any express prohibition against it. However, if your bank decides to charge a fee for paper statements, we recommend consulting with bank counsel to draft language in your disclosures that provides some way for customers who need paper statements for various reasons to request them for free.

For resources related to our guidance, please see:

Regulation E, 12 CFR 1005.9(b) (“For an account to or from which electronic fund transfers can be made, a financial institution shall send a periodic statement for each monthly cycle in which an electronic fund transfer has occurred; and shall send a periodic statement at least quarterly if no transfer has occurred. The statement shall set forth the following information, as applicable: . . .”)

Regulation E, Official Interpretations, Paragraph 9(b), Comment 3 (“A financial institution need not send statements to consumers whose accounts are inactive as defined by the institution.”)

Regulation E, 12 CFR 1005.4(a)(1) (“Disclosures required under this part shall be clear and readily understandable, in writing, and in a form the consumer may keep, except as otherwise provided in this part. The disclosures required by this part may be provided to the consumer in electronic form, subject to compliance with the consumer-consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act). . . .”)

Illinois UCC, 810 ILCS 5/4-406(c) (“If a bank sends or makes available a statement of account or items pursuant to subsection (a), the customer must exercise reasonable promptness in examining the statement or the items to determine whether any payment was not authorized because of an alteration of an item or because a purported signature by or on behalf of the customer was not authorized. If, based on the statement or items provided, the customer should reasonably have discovered the unauthorized payment, the customer must promptly notify the bank of the relevant facts.”)

Illinois UCC, 810 ILCS 5/4-406(d) (“If the bank proves that the customer failed, with respect to an item, to comply with the duties imposed on the customer by subsection (c), the customer is precluded from asserting against the bank: (1) the customer's unauthorized signature or any alteration on the item, if the bank also proves that it suffered a loss by reason of the failure; and (2) the customer's unauthorized signature or alteration by the same wrongdoer on any other item paid in good faith by the bank if the payment was made before the bank received notice from the customer of the unauthorized signature or alteration and after the customer had been afforded a reasonable period of time, not exceeding 30 days, in which to examine the item or statement of account and notify the bank.”)

Illinois UCC, 810 ILCS 5/4-406(f) (“Without regard to care or lack of care of either the customer or the bank, a customer who does not within one year after the statement or items are made available to the customer (subsection (a)) discover and report the customer’s unauthorized signature on or any alteration on the item is precluded from asserting against the bank the unauthorized signature or alteration. . . .”)

E-SIGN Act, 15 USC 7001(c) (“ . . . if a statute, regulation, or other rule of law requires that information . . . be provided or made available to a consumer in writing, the use of an electronic record to provide or make available (whichever is required) such information satisfies the requirement that such information be in writing if [among several other requirements] the consumer has affirmatively consented to such use and has not withdrawn such consent; . . .”)

Illinois Financial Institutions Electronic Documents and Digital Signature Act, 205 ILCS 705/10(c) (“If a statute, regulation, or other rule of law requires that information relating to a transaction or transactions in or affecting intrastate commerce in this State be provided or made available by a financial institution to a consumer in writing, the use of an electronic record to provide or make available that information satisfies the requirement that the information be in writing if: (A) the consumer has affirmatively consented to the use of an electronic record to provide or make available that information and has not withdrawn consent; (B) the consumer, prior to consenting, is provided with a clear and conspicuous statement: informing the consumer of: (I) any right or option of the consumer to have the record provided or made available on paper or in nonelectronic form, and (II) the right of the consumer to withdraw the consent to have the record provided or made available in an electronic form and of any conditions, consequences (which may include termination of the parties' relationship), or fees in the event of a withdrawal of consent . . . .”)

Consumer Financial Protection Act of 2010, 12 USC 5536(a) (“It shall be unlawful for (1) any covered person or service provider . . . (B) to engage in any unfair, deceptive, or abusive act or practice.”)