CUNA satellite broadcast tackles growing body of online laws

MADISON, Wis. - Credit unions won't find it easy to keep up with the latest online laws and regulations. With individual states taking matters into their own hands and enacting their own online laws, and a growing body of federal legislation in the pipeline, sifting through the online regulation maze can be difficult. A recent CUNA & Affiliates' national satellite broadcast, "Online Laws and Regulations" attempted to bring some focus to this still hazy area. The consensus is that credit unions are going to have to wait and see what final regulations they will have to follow with their Web efforts, but there are things they should be doing right now no matter what final regulations come. Steve Rodeman, vice president/general counsel for Safeway Northwest Credit Union kicked off the satellite broadcast with a look at what credit unions should be mindful of from a legal standpoint when bringing products and services online. Though the Internet is a high-tech arena, the laws credit unions really have to be wary of right now are existing laws for paper-based operations, said Rodeman. "Nothing is different ... you're still providing the same services. All you're really doing is using a different channel. The challenges are not really new challenges," said Rodeman. But Rodeman said meeting the requirements for the physical world can be tricky on the Web. Credit unions that post loan rates on their site, for example, have to consider all of the requirements they are bound to in their branches and printed material. Loan rates have to be posted as APR on the Web. For all advertising for FHA mortgage loans credit unions need to follow the advertising requirements and logo mandates as dictated by the Fair Housing Act. "You have to recognize that your Web page is considered as an advertisement," said Rodeman, a multi-page advertisement at that, he emphasized. Credit unions have to be concerned about every nook and cranny of their site, he said. Rodeman said credit unions should consider also the time difference of the electronic world and make sure that their online initiatives are tightly integrated into the CU's other operations. For example, the Real Estate Settlement Procedures Act (RESPA) requires that applicants receive some disclosures within three days. If the mortgage department isn't notified when an application comes in over the Web, they may miss the three-day window. Rodeman discussed the five most common problems that NCUA found with CU Web sites. They are the following: the credit union not having the official NCUA sign and insurance statement properly displayed; share rates not quoted as APY; Equal Housing logo not displayed with mortgage loans; loan rates not quoted as APR; and credit card disclosures not formatted correctly. Presentation is also important. By law, certain disclosures for credit cards have to be in a tabular format, displaying rates, fees and other information about the product. Credit unions have to bring that tabular format to their Web site. Anywhere a credit union talks about deposit accounts on their site, NCUA wants to see the share insurance disclosure, as members see on statements or in brick and mortar branches, said Rodeman. Credit unions should also be mindful of "trigger" terms, such as "open ended" loan and others, that carry certain requirements, said Rodeman. Mike McLain, assistant general counsel and senior compliance counsel, for CUNA & Affiliates said despite the newness of online laws and the still unpaved territory, credit unions can take advantage of the efficiencies of electronic delivery. He said credit unions can deliver monthly statements and many disclosures electronically if they get the member's consent. The benefits of electronic statements and disclosures include reduced paper costs, employee time, postage expense, printing, storage and handling costs, said McLain. He said the members also benefit by receiving statements and disclosures faster and in a more convenient form, which they can print on their own if they choose. Members must receive electronic disclosures prior to opening an account, accessing EFT service or finalizing a loan. Electronic disclosures must be in a form the member can print or download. Credit unions should also make it clear to members whether electronic disclosures will be sent to a member's e-mail account or displayed on the Web site, said McLain. Under Reg Z for home equity loans, members that apply online must see loan product disclosures on a screen prior to starting the online loan application, said McLain. Credit unions must also make sure that all disclosures are "clear and conspicuous." There is one uniform body of rules and regulations that states are adopting. They are contained in the Uniform Electronic Transactions Act, which was written by the National Conference of Commissioners on Uniform State Laws. So far California and Pennsylvania have adopted the UETA, and another 18 states are planning on adopting it this year. Though it is a uniform body of rules, some states are planning on altering UETA somewhat. Jana Eckerle, associate counsel in the office of general counsel for CUNA Mutual Group discussed UETA and other laws. "It's (UETA) not a cure-all. It provides a basic framework for states to fill in the details," she said. She said California and Pennsylvania both made modifications to UETA before adopting it. Credit unions are going to find very inconsistent online state laws, she said. Eckerle did touch on two bills pending in Congress, H.R. 1714, Electronic Signatures in Global and National Commerce Act and S761 Millennium Digital Commerce Act. She said both bills are designed at encouraging the expansion of e-commerce, but it's unclear what final legislation will look like, as consumer groups have voiced concerns about the whole concept of electronic consent. -pgentile@cutimes.com