Although the Consumer Financial Protection Bureau (CFPB) had slowed its enforcement actions considerably in 2018, several actions have come out of the bureau in the last few months including a recent settlement with USAA Federal Savings Bank (USAA), a federally chartered savings association headquartered in San Antonio, Texas, with approximately $80.5 billion in total assets. Without admitting or denying any of the alleged violations outlined in the 39-page consent order, the bank agreed to the terms of the order, to provide over $12 million in restitution and pay a $3.5 million civil money penalty. So what were the violations? USAA was found to have violated the Electronic Fund Transfer Act (EFTA) and Regulation E by not stopping preauthorized electronic fund transfers (EFTs) and by not initiating and conducting adequate error resolution investigations. The CFPB also found the bank violated the Consumer Financial Protection Act of 2010 (CFPA) by reopening closed consumer deposit accounts without getting prior authorization or giving adequate notice to the consumers.
The EFTA and its implementing Regulation E require a financial institution to allow a consumer to stop future payment of preauthorized EFTs and to contest incorrect or unauthorized past EFTs through an error resolution procedure.
According to the consent order, USAA uses the Automated Clearing House (ACH) to process EFTs from their customers’ accounts and accounts held by other financial institutions. On many occasions prior to 2015, the CFPB found the bank didn’t enter stop payment orders after the account holders had notified USAA they wanted to stop payment on preauthorized EFTs. Rather, the bank required their account holders to contact the merchants initiating the EFTs as a prerequisite for it to implement stop payment orders. In some cases, USAA didn’t enter stop payment orders because the consumers wanted to stop payments to payday loan lenders. The bank did not consistently honor oral stop payment requests for 14 days. When USAA didn’t have a system in place to stop payment of preauthorized EFTs processed by a debit card, it resulted in a failure to block thousands of preauthorized EFTs where consumers had requested stop payment.
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