The CFPB’s Latest Obsession
I’m beginning to think that the most cost effective way of dealing with the CFPB is to give it Power of Attorney over all of America’s bank accounts. This way we wouldn’t be nickeled and dimed to death with regulatory changes and guidance. After all, the basic premise of many of its actions is that if only people were as smart as the Bureau, they would never exercise their free will in ways that the Bureau doesn’t consider logical.
The latest CFPB obsession is the dreaded preauthorized or automatic debit. If you go onto its site this morning, it has a consumer primer on what exactly automatic debit is and how it can be canceled.
This comes on top of a compliance bulletin in which it highlighted short comings discovered in audits in complying with Regulation E, which mandates baseline disclosures be provided to members agreeing to automatic debits. For example, it explained that “[i]n at least one examination, CFPB examiners observed that one or more companies provided consumers a notice of terms for preauthorized EFTs from a consumer’s account” that did not satisfy Regulation E because the notices did not disclose important authorization terms such as the recurring nature of the preauthorized EFTs, or the amount and timing of all the payments to which the consumer agreed. In addition, members weren’t given a record of their confirmation. And, remember, consumers may stop payment of a preauthorized electronic fund transfer from their account by notifying the financial institution orally or in writing at least three business days before the scheduled date of the transfer.
Now, I refuse to believe there is an epidemic of unauthorized debit transfers. Obviously, the CFPB is trying to make automatic debit authority a point of emphasis as part of its larger examination of subprime and payday lenders who love to encourage the use of these payments.
While the CFPB prides itself on being a data driven organization, it should more accurately refer to itself as selectively data driven. For instance, I would be curious just how many of its examiners found problems with preauthorized withdrawals or if it simply cherry picks observations that confirm its biases. This is a lousy way to make policy and the constant refining of settled regulations increases compliance challenges and costs.
Now, go double check your preauthorized debit procedures.