CFPB Releases Compliance Bulletin About Obtaining Authorizations For Preauthorized Electronic Fund Transfers

The Consumer Financial Protection Bureau (the "CFPB") warned financial companies in a compliance Bulletin Monday that they must have proper authorization before automatically debiting funds from customers' accounts. (CFPB Compliance Bulletin 2015-06, November 23, 2015.)

The Electronic Fund Transfer Act and its implementing rule, Regulation E, require that companies obtain consumer authorization for electronic fund transfers, or debits, from consumers' accounts. The bulletin was partly meant to remind merchants and financial institutions that they must "clearly describe" the terms of an automatic withdrawal and get pre-authorization from the consumer before deducting payments. The agency's warning follows an administrative proceeding that the CFPB filed on November 18, 2015 against an online payday lender, Integrity Advance, partly on grounds that Integrity allegedly continued to automatically deduct funds from consumers' bank accounts after they cancelled