Truth in Lending, flood insurance infractions led list of consumer compliance violations for 2023

Violations of truth in lending and flood insurance regulations led the most frequently cited consumer compliance transgressions in 2023 for banks, according to a report issued Friday by the federal insurer of bank deposits.

The Federal Deposit Insurance Corp. (FDIC) said 74% of all violations involved infractions related to five consumer compliance rules (in order of volume): Truth in Lending Act (TILA) and Regulation Z, its implementing rule, the Flood Disaster Protection Act (FDPA) and its implementing regulation, Part 339; the Electronic Fund Transfers Act (EFTA) and its implementing regulation, Regulation E; the Truth in Savings Act (TISA) and its implementing regulation, Regulation DD; and Section 5 of the Federal Trade Commission Act (Section 5 of the FTC Act).

The agency listed the top consumer compliance violations for 2023 in its Spring 2024 Consumer Compliance Supervisory Highlights, a quarterly publication.

The agency noted that the 2023 list contains the same laws and regulations from 2022 but added that the order of the list has changed slightly: Section 5 of the FTC Act violations dropped from the second most frequently cited violation to the fifth most frequently cited violation, the FDIC said.

More specifically, the FDIC said in a release that the violations in the five areas focused on:

  • TILA/Regulation Z: 15 U.S.C. § 1604 of TILA and 12 CFR §§ 1026.38(f) – (k) of Regulation Z requires the creditor to accurately disclose certain closing cost information on the Closing Disclosure. “While TILA violations cited during 2023 were widely distributed among the various provisions of the regulation, this section represented 9% of the total TILA violations cited,” the bank deposit insurer said.
  • FDPA/12 CFR Part 339: Section 102 of the FDPA, 42 U.S.C. § 4012(b), and section 339.3(a) of the FDIC Rules and Regulations, requires that adequate flood insurance be in place at the time a covered loan is made, increased, extended, or renewed. The agency said this section represented 47% of the total FDPA violations cited in 2023.
  • EFTA/Regulation E: 15 U.S.C. § 1693f of the EFTA and 12 CFR § 1005.11(c) of Regulation E requires a financial institution to investigate allegations of electronic fund transfer errors, determine whether an error occurred, report the results to the consumer, and correct the error within certain timeframes. This section represented 46% of the total EFTA violations cited in 2023, according to FDIC.
  • TISA/Regulation DD: 12 U.S.C. § 4304 of TISA and 12 CFR §§ 1030.4(a) and (b) of Regulation DD set forth timing and content requirements for deposit account disclosures. “While TISA violations cited during 2023 were widely distributed among the various provisions of the regulation, this section represented 9% of the total TISA violations cited,” the agency said.
  • Section 5 of FTC Act: Section 5 of the FTC Act prohibits unfair or deceptive acts or practices in or affecting commerce. “The FDIC cited violations for instances when financial institutions charged multiple non-sufficient funds (NSF) fees for the re-presentment of the same transaction, but the disclosures did not fully or clearly describe the financial institution’s re-presentment practice,” FDIC said. “This included instances where the institution did not explain that the same unpaid transaction might result in multiple NSF fees if an item was presented more than once. The FDIC frequently cited this issue, which represented 58% of all Section 5 of the FTC Act violations in 2023.”

Consumer Compliance Supervisory Highlights

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