Reg E and ESIGN – Collectors Look for Compliance Guidance

With the CFPB continuing to flex its regulatory muscles, it’s no surprise that collectors are making compliance a priority. Industry interest is high – BillingTree recently ran two well-attended webinars focused on electronic payment compliance with industry experts helping to map out a cloudy regulatory landscape. Top concerns? Reg E and ESIGN. Dave Yohe, Head of Marketing at BillingTree explains.

The first webinar was part of BillingTree’s payment technology spotlight series. The panel included Charity Olson, managing attorney with the Olson Law Group, and Ontario Systems’ Jennifer Phillips, financial services director and Richard Brown, compliance associate.

The second webinar evolved from results of the BillingTree ARM Operations and Technology Survey, where Reg E/ESIGN ranked as the most important compliance concern for collection professionals. The panel included best practice advice from David Kaminski, litigation defense and compliance attorney and partner at Carlson & Messer LLP.


Here are the two key takeaways for collectors:

Regulation E – Just when does it apply? Answers here!

Reg E covers payments known as ‘electronic funds transactions’ – ACH payments and debit card transactions. Rule-making is shared between the Federal Reserve and the CFPB. But with the increasing strictness of the CFPB there has been confusion among collectors as to what type of transaction is covered by Reg E, as well as how it applies to recurring payments.

A specific pain point highlighted in the debate was whether debit cards being used as credit cards are covered by Reg E. The panel agreed that if funds are being collected directly from a deposit account, then Reg E applies. An ‘account’ in this instance is defined as any “demand deposit, savings deposit or other asset account established for personal, family or household purposes.”

Both panels urged collectors to demonstrate best practice by training agents to establish where funds are being taken from at the point of processing.

An attendee poll reflected the industry polarity around Regulation E. Just over half of attendees – 54% – said they’d made changes to accommodate Reg E in recurring payments, while 35% said they’d taken no measures to adjust to guidelines.


ESIGN – easy to get wrong

ESIGN is the replacement of wet ink signatures on paper documents with an electronic alternative, allowing records to be kept electronically. Collectors must comply with a long list of to-dos involving disclosure of consumer rights and visibility.

But understanding ambiguous guidelines such as ESIGN can be difficult, and companies without vast financial or human resources certainly don’t want to become the test case for any litigation.

“There are various ways that an entity can get this wrong, unwittingly and without intending to,” commented Charity Olson. “We’re at an intersection of regulatory oversight, new payment technologies and human error. What you have is a perfect storm for litigation.”

With the CFPB not explicitly setting out how these disclosures should be made and presented, collectors are left to seek legal best practice advice or consult guidelines laid down by NACHA.

The webinars echoed that collectors, attorneys and compliance specialists have all been left debating the best practice around ESIGN. Our panelists agreed that outsourcing this to specialist solutions providers at least proves dedication to comply with the act.

Both webinars can be found on the resources section of the BillingTree website: