A template for employee applications to employer-created automatic savings (autosave) programs has been deemed by the Consumer Financial Protection Bureau (CFPB) to be compliant with Electronic Funds Transfer Act (EFTA) and related Regulaion E provisions against “compulsory use,” the CFPB said Friday.
The application template, created by Build Commonwealth, Inc., was evaluated under the CFPB’s Compliance Assistance Sandbox program, which encourages testing of a financial product or service, and the subject of a “no action” letter from the bureau Friday. That letter says the template – the “Compliance Assistance Statement of Terms Template” (CAST Template) – may serve as the basis for applications for an approval by employers that wish to enroll employees in emergency savings programs. An organization testing a program with the CFPB’s approval under a no-action letter enjoys a “safe harbor” from liability under the regulatory provisions cited.
“Under an Autosave program, new and existing employees would be able to build emergency savings by directing a portion of their earnings to an existing account at a financial institution of their choice,” the bureau said in a release Friday on the CAST Template. “If an employee does not designate an account, the employer would create an Autosave account for the employee at an institution designated by the employer. Autosave programs would be structured similarly to automatic 401(k) retirement savings programs and employees would receive certain advance notice, and have the right to not participate.”
Key to avoiding a violation of the EFTA “compulsory use” provisions, the CAST Template allows employees to designate a depository institution other than the default institution designated by the employer.
As further explained in the no-action letter, employees applying for employer emergency savings programs using the CAST Template would be permitted to direct their autosave earnings to an account at the institution of their choice and to change the amount of earnings contributed. “If an employee does not designate an account, the employer would create an Autosave Account for the employee at a designated institution and direct the employee’s earnings under the Autosave Program to the Autosave Account created by the employer. Employees could change the contribution amount, change the account-holding institution, or opt out of the program entirely at any time,” the letter states.