Last Week... Today! Fed Amends Reg CC, TransUnion Confuses Customers with Crooks, Veterans Frustrated with VA Debt Collections
The Fed Amends Reg CC Part II: The Expeditious Return, NAFCU Compliance Blog
On May 31, 2017, the Federal Reserve Board issued a final rule amending Regulation CC. Previously, we discussed how this new Regulation CC addresses electronic checks and RDC warranties and indemnifications. Now, we're going to have a look at another big change in the final rule: the expeditious return of checks.
But before we dive in, let's a take a moment to acknowledge that Regulation CC can be technical and boring. Your NAFCU Regulatory Compliance Team does the best we can to make it interesting... but there's only so much you can do.
Expeditious Returns Under Current Regulation CC
Currently, under sections 229.30(a) and 229.31(a), a credit union returning a check is required to do so in "an expeditious manner." An expeditious manner is a manner that meets one of two tests: the two-day test or the forward collection test.
The two-day test (a/k/a the two-day/four-day test) requires that the check must be received by the depositary bank no later than 4:00pm its local time on the second business day from when the check was presented for payment.
The forward collection test compares a credit union's swiftness in its handling of a check for return to its handling of a check for collection. It requires the return to be made in the same manner that a similarly situation bank (or credit union) would normally process a check of the same amount if it had theoretically been deposited by noon on the day after it was actually presented for payment, and was being sent for collection, rather than return.
Under section 229.33, if a check is in the amount of $2,500 or more, a credit union returning the check must also provide a notice of nonpayment. That notice must be provided in a manner that meets the two-day test. The return of the check itself may serve as the required notice of nonpayment, assuming the returned check includes all the content requirements for the notice.
Expeditious Returns Under the Final Rule
Part of the Fed's goals in issuing a new rule is to encourage electronic processing of checks. The Fed stated that an electronic clearing process "offers lower costs, faster returns, and fewer errors, which substantially reduces risk to the check system compared to the previous largely paper-based environment." In an effort to incentivize the implementation of electronic check returns, the Fed is implementing stricter requirements for what constitutes an expeditious return.
A corporate representative for TransUnion conceded Tuesday in California federal court that one of the company’s databases conflated consumers with similarly named terrorists and criminals from a government watch list, bolstering plaintiffs’ claims in an $8 million class action over alleged Fair Credit Reporting Act violations.
Colleen Gill, a former project manager at TransUnion LLC, testified Tuesday that in the wake of the 9/11 attacks, many companies wanted to check consumers against the U.S. Department of Treasury’s Office of Foreign Assets Control database, which lists terrorists, drug traffickers and other criminals.
“When the Patriot Act was announced in October 2001, a lot of companies wanted to check names against the OFAC list,” she said. “There was widespread interest. A lot of customers were requesting it.”
But Gill, who helped launch TransUnion’s version of the database, conceded that reports about law-abiding consumers were sometimes linked to similarly named criminals on the OFAC watch list.
The suit, filed in February 2012, alleges lead plaintiff Sergio L. Ramirez was prevented from buying a car in 2011 because TransUnion told lenders he potentially matched two entries on the OFAC list. When he tried to get off of TransUnion’s list, Ramirez said the company’s customer service agents gave him “the runaround" and didn’t explain how the error could be corrected.
The suit is seeking an award of $1,000 for each of the 8,185 class members.
In July 2014, U.S. Magistrate Judge Jacqueline Scott Corley partially granted Ramirez’s motion for class certification, forming a national class seeking punitive statutory damages under the FCRA, as well as a California subclass based on a similar state law seeking injunctive relief.
At trial on Tuesday, class counsel John Soumilas of Francis & Mailman PC showed Gill a sample credit report with a potential OFAC match. The date of birth listed for the OFAC name was different from the date of birth entered by the consumer, yet Gill admitted that no one at TransUnion cross-checked such data, and that the company requesting the credit check would have indeed been alerted to a potential OFAC match.
She said the company eventually developed a procedure by which she would use her discretion to determine whether a match was legitimate, but only after a customer disputed the results.
Gill told TransUnion attorney Bruce Luckman of Sherman Silverstein Kohl Rose & Podolsky that there was “widespread interest” from companies for the search service, since U.S. companies doing business with people on the OFAC list face criminal penalties.
She said TransUnion ultimately took steps to remind companies in an email notification that a potential OFAC match in a credit report wasn’t a guarantee the individual customer was on the government’s list, and was only “a first step in a process.” She also said TransUnion eventually changed the wording of its OFAC results from “match” to “potential match.” Read More.
VETERANS ARE FRUSTRATED WITH THE VA’S PAINFUL DEBT COLLECTION PROCESS, Vice News
The U.S. House of Representatives on Tuesday passed a bill aimed at increasing accountability at the U.S. Department of Veterans Affairs, three years after the agency was plunged into a major scandal over falsified records. A slew of other reform efforts are underway, but veterans and advocates say the VA remains confusing and frustrating to deal with.
One key reform not yet on the table is an overhaul of how the VA collects debts from veterans and their family members.
Julie Larsen of the American Legion, the largest advocacy organization for veterans in the United States, testified before Congress last month that some of these debts are the VA’s fault — the result of the same types of haphazard systems and standards that caused the 2014 records scandal.
Many debts result from benefits overpayments — because of an error in accounting or reporting, the agency pays a veteran too much. A VICE News investigation earlier this year found that the VA sent nearly 187,000 overpayment notices to veterans and their families in 2016. Some were for debts in the tens of thousands of dollars, with the potential to upend veterans’ lives.
Under current rules, the VA can withhold benefits from veterans it says owes the agency money, even if the debt is the result of some error on the VA’s part. Veterans who received overpayment letters told us they had to jump through hoops to get more information and they often ran into dead ends in the appeals process. Some had their benefits withheld without ever understanding how much they really owed the VA or why.
After we published our story in March, more than 70 veterans and their families reached out to say they’d faced similar challenges trying to settle their debts to the VA. HERE are a few of their stories.
Starting July 1, Some Black Marks Wil Vanish from Credit Reports, San Francisco Chronicle
Many people with tax liens, civil judgments and certain medical debts on their credit reports could soon see a rise in their credit scores.