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USAA Consent Order: The Criticality of Sensible Procedures

Last week, the CFPB issued its first consent order of 2019 and the its first consent order under Director Kathleen L. Kraninger. The Consent Order is with USAA Federal Savings Bank dealing with violations of the Electronic Funds Transfer Act, 15 U.S.C. § 1693, et seq., its implementing regulation, Regulation E, 12 C.F.R. pt. 1005, and the Consumer Protection Act of 2010, 12 U.S.C. §§ 5531, 5536. As with most consent orders there was no admission of any wrong-doing by USAA.

The violations stemming from the EFTA and Reg. E are surprising only because the failures cited by the CFPB appear to be easy items to comply with implementing stop payment orders from consumers regarding preauthorized EFTs. In fact, in some instances, USAA allegedly required consumers to contact the merchants directly submitting the EFT as a prerequisite for implementing the stop payment order. Contributing to the problem was an alleged policy of USAA to not stop payment when requested if the EFTs payment was to a payday loan lender.

If the consumer complained of errors regarding EFTs, USAA failed to properly investigate the reported errors unless the consumer completed a specific internal document and listened to the following warning:

“If we determine that the ACH debit in question was authorized, you will be putting your USAA membership at risk. What this means to you is that you may become ineligible to purchase additional USAA products and that existing USAA accounts may be closed. Also, please understand that it is a federal crime to make a false statement to a bank and this is punishable by a fine of up to one million dollars or imprisonment for up to 30 years, or both.”

In the Matter of USAA Federal Savings Bank, 2019-BCFP-0001, pg. 10.

These violations are a reminder that compliance with even the most basic matters is incredibly important. The ability of a bank, such as USAA, to stop payment on a preauthorized EFT is a simple matter. The creation of an internal document and procedure making it more difficult for a consumer to exercise their rights only brings about more problems. When thinking about compliance, agencies and law firms should look for simplicity – follow the statute, be nice to the consumer, and avoid having the consumer jump through unnecessary (and unrequired) hoops. Also, this serves as yet another reminder that it never makes sense to discuss unlikely (even if accurate) criminal penalties in the consumer finance space.