CFPB Releases Bulletin Outlining Automatic Debit Requirements For Financial Entities

On Monday, November 23, the CFPB released a new Compliance Bulletin to remind financial entities of their requirements when obtaining consumer authorizations for preauthorized electronic fund transfers (EFT). Mortgage servicers, student loan servicers, debt collectors, and short-term, small-dollar lenders are specifically highlighted in the Compliance Bulletin as entities engaged in preauthorized EFT transactions. These entities will want to take notice of the CFPB's explanation of the Electronic Fund Transfer Act (EFTA) and Regulation E requirements.

Many consumers elect to participate in automatic payment plans via preauthorized EFTs that allow entities to debit funds directly from consumers' bank accounts. This practice has boomed in recent years because it allows consumers to automatically pay recurring bills for their utilities, credit cards, car payments, or mortgages and avoid potential late fees. Preauthorized EFTs are different from recurring bill pay,