The CFPB has issued a statement regarding its supervisory and enforcement approach to Regulation Z billing error resolution timeframes in light of the COVID-19 pandemic.
In the statement, the Bureau acknowledges that some creditors and entities such as merchants, particularly those that are small businesses, may be facing significant operational disruptions as a result of the pandemic. For example, such disruptions may make it difficult for merchants to provide information to creditors in connection with investigations of consumers’ billing error notices. In turn, as the Bureau observes, this makes it more difficult for creditors to accurately and timely resolve such notices. The Bureau also observes that if creditors were to make decisions on such notices without access to merchants’ information, merchants could be damaged by owing chargebacks for transactions that might otherwise not have been deemed errors and consumers might be damaged by incorrect decisions based on insufficient information.
Due to these considerations, the Bureau indicates in the statement that in evaluating a creditor’s compliance with Regulation Z’s maximum timeframe for billing error resolution, the Bureau intends to consider the creditor’s circumstances and does not intend to cite a violation in an examination or bring an enforcement action against a creditor that exceeds that timeframe so long as the creditor “has made good faith efforts to obtain the necessary information and make a determination as quickly as possible, and complies with all other requirements pending resolution of the error.” As an example of good faith efforts, the Bureau indicates that a creditor may show that it obtained a reasonable estimate from the merchant of when it will be able to respond or reasonably determined that the merchant “is unable to respond to the creditor’s request for information for the time being.” The Bureau also encourages creditors to show flexibility to consumers when deciding whether to apply the Regulation Z 60-day timeline for providing a billing error notice after the error appears on the first periodic statement.
At the same time, the Bureau indicates that it does not expect the pandemic to prevent any creditor from fully complying with the Regulation Z requirements in Section 1026.13(d). Until a creditor resolves a billing error in compliance with the Regulation Z procedures, the creditor is subject to the following requirements in Section 1026.13(d):
- The consumer need not pay, and the creditor may not attempt to collect, any portion of any required payment that the consumer believes is related to the disputed amount, including related finance or other charges.
- The creditor or its agent may not, directly or indirectly, make or threaten to make an adverse report about the consumer’s credit standing or report that an amount or account is delinquent because the consumer failed to pay the disputed amount or related finance or other charges.
- The creditor may not accelerate any part of the consumer’s indebtedness or restrict or close a consumer’s account solely because the consumer has exercised in good faith his or her billing error dispute rights.
It should be noted that despite the supervisory or enforcement relief offered by the CFPB, creditors could still face consumer litigation alleging Regulation Z violations where the creditor has exceeded the error resolution timeframes.