In March, WBA joined 12 other state bankers associations by signing on to an amicus brief filed by the Minnesota Bankers Association (MBA) for a Consumer Financial Protection Bureau (CFPB) lawsuit against Wayzata, Minn.-based TCF Bank. The lawsuit challenged the way TCF Bank had implemented the Regulation E "Opt-in" rules, which addressed overdrafts caused by electronic transaction cards. Rather than settling the case, TCF Bank chose to fight the allegations, filing a motion to dismiss the CFPB's claims. Considering this lawsuit could have a far-reaching impact on overdraft programs and retroactive application of regulations, WBA felt it appropriate to lend support to TCF Bank and MBA's amicus brief.
On Friday, September 15, the United States District Court for the District of Minnesota issued an order granting TCF Bank's motion to dismiss CFPB's claims that TCF Bank violated Regulation E.
Regulation E "Opt-in" rules required banks to take action not only for new customers, but it also applied to all of the banks' existing customers. That situation presented significant challenges for banks to maintain compliance.
The Regulation E claims were especially troubling for the banking industry as a whole; CFPB acknowledged that TCF Bank provided all the proper Regulation E Opt-in disclosures and notices. They acknowledged that every customer that opted-in to overdraft coverage for card transactions had given affirmative consent. But CFPB said that because "consumers rarely read written disclosures," CFPB would look beyond the written disclosures and consider the bankers' verbal explanations of the written disclosures.
Regulation E does not require verbal explanations of the written disclosures. In the amicus brief, the Court was urged to reject this new, unwritten requirement and to enforce Regulation E as it is written. Otherwise, this would set a new legal standard which would result in considerable uncertainty and new significant liability for all financial institutions. The Court agreed with these arguments—specifically stating that it appreciated the state bankers associations' amicus brief—concluding that the bank had in fact complied with Regulation E, and refused to read CFPB's additional, unwritten requirements into the regulations.
CFPB also filed claims against TCF Bank for deceptive acts or practices as to new customers, and abusive acts or practices as to new customers, which were not dismissed, but the Court did limit those claims. It dismissed the UDAAP claims that related to actions taken by the bank before the effective date of the Dodd-Frank Act, which created the "abusive" standard and the date that the CFPB became operational, thus avoiding the legal precedent of retroactively enforcing regulations on actions that occurred before the regulations existed.
With respect to the remaining, limited claims, the bank continues to believe that it has both the law and the facts on its side. All the issues discussed in the amicus brief that could widely impact the banking industry have been decided, and all of those decisions have followed the recommendations of the brief.