- No guns?
- CFPB reports on service members complaints
- FRB debit card interchange fee upheld
- Regulation E slips earn another bank a penalty
By Pauli D. Loeffler
Last year, Wells Fargo fired a bank manager for violating its employee policy by carrying her 9 mm handgun in her purse to work rather than locking it in her car. Ivette Ros filed suit in February against her former employer for violation of her Second Amendment Right to Bear Arms. Last week, I received an email from a bank which also has a no guns at work policy in its employee manual but has yet to determine its policy with regard to the public. A local attorney had told the bank that it was not legal for the bank to have such a policy. It seems like a good time to explore this explosive subject.
Here is a bit of history – the Oklahoma Self-Defense Act (“the Act”) found in Title 21 O.S. §§ 1290.1 et seq., was passed by the Oklahoma Legislature in 1995. It provided for licensing of eligible persons to carry described handguns as concealed weapons with restrictions on carry with regard to certain property (federal, state, county, municipal buildings), where alcohol is served (a restaurant can restrict hand guns at the bar), primary and secondary schools, etc. There have been various amendments over the years, and effective November 1, 2012, Oklahoma became an open carry state for handgun licensees. Further amendments were enacted last year, effective November 1, 2013.
§ 1290.22, as amended effective November 1, 2013, provides:
A. Except as provided in subsection B of this section, nothing contained in any provision of the Oklahoma Self-Defense Act shall be construed to limit, restrict or prohibit in any manner the existing rights of any person, property owner, tenant, employer, place of worship or business entity to control the possession of weapons on any property owned or controlled by the person or business entity.
B. No person, property owner, tenant, employer, place of worship or business entity shall be permitted to establish any policy or rule that has the effect of prohibiting any person, except a convicted felon, from transporting and storing firearms in a locked vehicle on any property set aside for any vehicle.
C. A property owner, tenant, employer, place of worship or business entity may prohibit any person from carrying a concealed or unconcealed firearm on the property. If the building or property is open to the public, the property owner, tenant, employer, place of worship or business entity shall post signs on or about the property stating such prohibition.
D. The carrying of a concealed or unconcealed firearm by a person who has been issued a handgun license on property that has signs prohibiting the carrying of firearms shall not be deemed a criminal act but may subject the person to being denied entrance onto the property or removed from the property. If the person refuses to leave the property and a peace officer is summoned, the person may be issued a citation for an amount not to exceed Two Hundred Fifty Dollars ($250.00).
E. A person, corporation, place of worship or any other business entity that does or does not prohibit any individual except a convicted felon from carrying a loaded or unloaded, concealed or unconcealed weapon on property that the person, corporation, place of worship or other business entity owns, or has legal control of, is immune from any liability arising from that decision. Except for acts of gross negligence or willful or wanton misconduct, an employer who does or does not prohibit their employees from carrying a concealed or unconcealed weapon is immune from any liability arising from that decision. The provisions of this subsection shall not apply to claims pursuant to the Workers’ Compensation Code.
The changes to the statute are:
- Subsections A. and B. of the statute have been amended to add place of worship
- Subsections C., D., and E. are wholly new provisions
Prohibition on firearms in locked vehicles on bank property
Subsections A and B, when read together, limit owner, tenant, business, place of worship owning or in control of the premises from banning legal firearms that are properly locked in vehicles in the parking lot. Subsection B merely reinforces Title 21 O.S. § 1289.7a which prohibits the property owner, tenant, employer, or business entity from maintaining, establishing, or enforcing any policy or rule prohibiting any person, except a convicted felon, from transporting and storing firearms or ammunition in a locked motor vehicle, or from and storing firearms or ammunition locked in or locked to a motor vehicle on any property set aside for any motor vehicle.
§ 1289.7a gives the individual affected by such prohibition the right to bring a civil action, and if the plaintiff prevails in a civil action related to the personnel manual, he is entitled to actual damages, court costs and attorney’s fees as well as injunctive relief. I will note that while § 1289.7a survived a constitutional challenge in the 10th Circuit Court Appeals prior to the addition of the portion in italics, the amendment has not been challenged since amendment. The unanswered question here is whether the bank’s employee manual can contain a provision restricting transporting or storing firearms and ammunition with regard to vehicles provided by the bank for use by an employee.
Subsection C gives the property owner, tenant, etc. the right to prohibit concealed and unconcealed weapons on its property (other than those in locked vehicles, and those required to be carried at all times by peace officers by statute). BUT it goes on to provide that if the building or property is open to the public, signs stating the prohibition shall be placed on or about the property. Oklahoma’s statute, unlike those of other states with a signage provision, does not specify the size, location or how the prohibition must be stated. A handgun with the international symbol for NO (circle with a diagonal line through it) superimposed on the handgun which most businesses prohibiting weapons already use, will do, but the bank (or the owner of a strip or shopping mall) could post signs at the entrances to the property stating no weapons permitted inside. There are some additional suggestions with regard to signage in the Enforcement section, below.
I do have more than a little heartburn with the wording the building or property is open to the public. Generally, employees have access to all areas of the bank, but the public does not. If the bank has an employee policy of no handguns, even without signs on or about the area open to the public, there is some question whether Subsection C would apply with regard to “employee only” areas. Enforcing your employee policy with regard to the public areas would require a court decision since many job duties will require some of your employees to be in both the public and private areas. Or perhaps the bank has a branch within a grocery or other store that does NOT have signage. Would signage at the counter permit enforcement of the employee policy? Without knowing whether it does, employers wanting to restrict a licensed employee’s ability to carry a weapon when the bank does not have signage prohibiting the public risks a lawsuit. Employees do not leave their individual rights at the workplace door, but employers may limit employee rights in certain respects (think of your dress code). By the way, the bank is prohibited by statute from inquiring of an applicant for employment whether the applicant owns a gun.
Enforcing a no gun policy
Frankly, Subsection D doesn’t do much for me. It specifically states being on the posted property is not a crime. It provides that entry may be denied or the person may be removed this seems to require more than simply requesting saying: “I’m sorry, but we do not allow weapons here as indicated by the signs. Please lock your gun in the car and come back." At that point, the arms bearer must refuse to leave, which permits the bank to call the police. Rather than have an argument in your lobby, perhaps having conspicuous signs stating “Weapons prohibited: Entry will be denied, police will be summoned and you may be subject to a fine of up to $250 for failure to leave.” I admit, this isn’t particularly in line with the image of a friendly, neighborhood bank, but it may save a heated argument or physically ejecting the person.
But I have additional problems with Subsection D. It states: “If the person refuses to leave the property and a peace officer is summoned, the person may be issued a citation for an amount not to exceed Two Hundred Fifty Dollars ($250.00).” Unlike the other statutes under the Act, which denominate a violation as a misdemeanor and/or subject to a civil penalty by way of administrative actions by the OSBI, I have no clue. The provision may be susceptible to a constitutional challenge for vagueness.
Restricting the handguns for the purpose of maintaining a safe and productive working environment comports with OSHA, but Subsection E really does not address the issue of policy for employees v. policy in posting. It merely relieves the bank from liability whether or not it allows the non-employees entry with guns with the exception of workers’ compensation claims.
Policy and liability to employees
Subsection E provides that whether or not the bank permits or prohibits firearms on the premises or permits or prohibits employees carrying concealed or unconcealed weapons (other than permitting a convicted felon from having a weapon), no liability exists for the decisions. The employer is immune for liability for ordinary negligence stemming from its decision to permit or prohibit its employees from carrying a firearm. The immunity does not extend to tort claims stemming from the decision, other than ordinary negligence, nor would Workers’ Comp claims be affected. Keep in mind, the employer may still be liable for injury or damage for negligence in hiring, training or supervision without regard to the decision itself. This is something to keep in mind in determining policy if you have one or more hot-headed, impulsive employees or paranoid employees.
Not only must a licensee keep the weapon properly holstered, he is subject misdemeanor charges (imprisonment in the county jail, fine and suspension of license) for using or carrying a firearm while under the influence of alcohol, illegal substances or any drug prescribed by a licensed physician if the aftereffects of consumption affect mental, emotional or physical processes to a degree that results in abnormal behavior, or reckless conduct demonstrating a conscious disregard for safety in handling a firearm. Felony offenses punishable by confinement in prison, fines and permanent revocation of license include felonious pointing, and willful or intentional discharge of a firearm into a dwelling or business.
There are no definite answers regarding the breadth and effectiveness of the statute’s immunity provisions other than these will not cover the bank with regard to a criminal act. Similar untested immunity provisions are found in other statutes under the Act, but until these are tested by case law, it is impossible to know how far the immunity extends.
CFPB reports on service member complaints
By Andy Zavoina
Because Oklahoma is a state that takes a lot of pride in the way it treats servicemembers and veterans, we are reviewing the Consumer Financial Protection Bureau’s recent report on complaints it’s received from service members. In this article we will focus on issues directly tied to banks in particular and lessons that can be learned from the March 2014 report.
The CFPB started taking complaints in July 2011. Categories of complaints were added as time went on. From 2012 to 2013 complaints rose 148%. Part of that increase can be attributed to the Bureau’s additions to the list of complaint types it accepts, and to increased public awareness of the Bureau’s role in accepting and following up on consumer complaints.
The CFPB boasts that since it has been taking complaints and playing a major role in the process $1,000,000 has been recovered for complainants. As the different categories of complaints are addressed in the report the CFPB does consistently state the median amount a business refunded to a complainant. Reporting a refund is optional so this is on the low side but it is easy to see the small amounts of refunds made on average, and contrast that to what you would estimate the cost of responding to a complaint is in your bank. Between receiving a complaint, researching and responding to it — perhaps more than once — in addition to the reputation hit for valid complaints, it can easily be deduced that the complaint is more costly if the situation could have been easily avoided in the first place.
The Military Lending Act is addressed briefly by Holly Petraeus, Assistant Director of the Office of Servicemember Affairs, in her opening comments in the report. Fortunately for banks her targeted comments about the violations of law are directed toward payday lenders, those making refund anticipation loans on tax returns, and car title lenders.
The Office of Servicemember Affairs (OSA) is a part of the CFPB which specializes in protecting servicemembers’ rights, including rights and protections under the Servicemembers Civil Relief Act, and responding to complaints because servicemembers encounter unique situations. Complaints reviewed below from the OSA are from July 2011 through February 2014.
Reviewing the complaints handled by the OSA allows us the opportunity to examine our own procedures for responding to complaints to determine what we can do. Complaint totals received by category were reported as follows:
Total complaints – 14,100
Mortgages – 4,700
Debt collections – 3,800
Credit cards – 1,700
Bank accounts – 1,500
Credit reporting – 1,200
Consumer loans – 600
Student loans – 400
Complaints are received by the CFPB through a variety of channels, including its website (62%), telephone calls (23%), regulatory agency referrals (8%) and mail, email and fax (17%). Of the complaints, 9,700 were forwarded to companies, including banks, for review and response. 20% were forwarded to other agencies to handle, 6% were determined to be incomplete and 5% are in the Bureau’s "pending" file.
When a complaint is forwarded to a company a response is required, and the CFPB shares that response with the complainant. In the complaints reviewed for this report the CFPB indicates that was done 8,700 (90%) times. Of the servicemembers who responded, 2,000 (23%) disputed the response from the company. As the saying goes, "it ain’t over till it’s over." Any time a complaint is being investigated it is important to provide a thoroughly researched response. The consumer may not always agree but that doesn’t mean the bank or company responding is wrong. But ensure that the response sent is accurate and factual. Having to reverse a position after reconsidering a complaint could be embarrassing.
The following is a recap of the major complaint categories of interest to bankers.
There were 1,700 complaints involving credit card accounts. Billing disputes comprised 14% of the complaints, as it appears servicemembers are confused over billing disputes procedures, allowing and stopping recurring charges against the credit line, identity theft and the annual percentage rate/interest rate. This last item is important as the 6% rate cap specified in the SCRA can come into play. Make sure that those in your bank handling SCRA requests and complaints understand the 6% cap is on “interest”, but under the statute, most fees (life insurance is an exception) are counted as interest. This means, for example, a late fee is added to the finance charge (interest) to compute the 6%. If the rate was reduced to 6%, and then a late fee is added, a rate cap violation would exist. Another issue specific to revolving lines such as a credit card are that charges made prior to the SCRA protections get the 6% rate but charges made after that can be charged interest at the contractual rate as that is new debt.
One complaint involving a credit card dispute exemplifies why the SCRA protections exist. "One consumer complained that his credit card company sought a default judgment against him while he was deployed. The judgment was obtained without the proper documentation as required under the SCRA, and as a result, the consumer was unable to contest the judgment. The consumer submitted a complaint to the CFPB and the problems associated with the judgment were addressed; as a result, the consumer’s credit report was corrected and he obtained additional monetary relief.”
Another complaint stated “I am trying to rectify a credit issue [with my credit card] which is affecting my security clearance with the United States Army. My credit report currently reflects a judgment. I am an active duty service member currently deployed to Afghanistan. I would like to clear this matter if at all possible before I re-deploy back to the United States.”
There were 4,700 complaints involved mortgages. A breakdown of the subcategories of complaints pertaining to mortgages include:
Unable to pay 55%
Making payments 26%
Applying for credit 10%
Signing for credit 5%
Addressing credit offers 3%
Complaint subcategories were not always explained, but the inability to pay category includes servicemembers trying to request a loan modification, avoid foreclosure or respond to collection actions. It would appear this is a common concern between the lender and borrower and communication frequency, clarity and accuracy may need to be reviewed to avoid these complaints in the future.
Some complaints were that the lender was not aware of special programs or guidance that assists service members. One example is the permanent change of station guidance issued by the CFPB and other federal financial regulators as well as short-sale guidelines aimed at assisting servicemembers with PCS orders, such as the Federal Housing Financial Agency’s August 2012 Short Sale Guidelines for Fannie and Freddie Loans. The CFPB report stated "One consumer, a Navy officer, contacted his servicer in order to obtain approval for a short-sale pursuant to his receipt of PCS orders. He reports that he was told that he would not qualify unless he was delinquent on his mortgage payment. After the missed payments were reported to the credit bureaus, lowering the consumer’s credit score, the consumer submitted his complaint to the CFPB. The company acknowledged that the consumer qualified for the short sale due to his receipt of PCS orders, and did not need to be delinquent to qualify; as a result, the company agreed to correct the delinquency reporting."
Bank accounts complaints amounted to 1,500 complaints in this report. Subcategories include:
Account management 46%
Low funds problems 11%
Sending/receiving payments 9%
ATM card problems 5%
Opening, closing and managing accounts appears to be a problem. What guidance in these stages of a bank’s relationship with a servicemember could be offered? In this age of internet banking, enhancing communications with customers should help reduce these complaints.
Marketing advertisements seem to confuse the servicemembers as well. This is disturbing as these could lead to Unfair, Deceptive or Abusive Acts or Practices claims. Holds on funds was a common issue, as were unauthorized transactions, low funds balances that contributed to overdrafts and fees, and the payment order of items, primarily high to low. Banks with servicemember customers should examine the problems unique to them, time zone differences, using internet banking as opportunities allow, persons with Powers of Attorney handling their affairs, persons they "trust" handling their affairs without proper authorization and the like. What can the bank do pre-deployment to advise these customers of the risks, fees, and best management practices for servicemembers’ accounts?
Vehicle and Consumer Loans
There were only 600 complaints in this general category. Subcategories include:
Managing the loan 42%
Payment problems 23%
Getting the loan 19%
Shopping the loan 7%
Account terms 4%
The same lessons described above in "bank accounts" would apply here. It is in a bank’s best interest to address problems that may arise, especially on long distance relationships, before they start. Banks and servicemembers need to communicate about where the collateral will be, who will keep it insured, how payments will be made, etc.
There were 1,200 complaints in this category. Loan operations should carefully consider the SCRA and Fair Credit Reporting Act in these cases. I suspect many of the issues in these subcategories are compounded by poor collection techniques and servicers/collectors reporting debts already reported by the lender. Subcategories include:
Incorrect information 73%
Complaint investigation 11%
Problem getting a report/score 8%
Improper use of a report 5%
Monitoring & ID theft 3%
By reviewing complaints your bank receives and using categories similar to these, you can evaluate how you compare in handling them to your peers. In any case you know what the hot buttons are and what your examiners will want to review as to how complaints are investigated and resolved in your bank.
FRB debit card interchange fee upheld
By John S. Burnett
July 2013 D.C. Circuit Court ruling reversed
Section 1075 of the Dodd-Frank Act (often referred to as the “Durbin Amendment” to the Act) added a new section 920 to the Electronic Fund Transfer Act that imposes two substantive requirements relating to debit card interchange that the Federal Reserve Board was required to implement. First, the Fed was tasked with issuing rules to regulate debit card interchange fees to ensure that any fee that a card issuer will receive will be “reasonable and proportional to the cost incurred by the issuer” for the transaction, with an adjustment for fraud prevention costs. Second, the Board was also required to issue rules to implement certain prohibitions against network exclusivity arrangements and routing restrictions.
The Board issued Regulation II to address both requirements. Small issuers – those who, with affiliates, have assets under $10 billion at the end of the previous year – are not subject to the interchange fee limitations. Under section 235.3, an issuer subject to the interchange fee limits must limit its debit interchange fee to 21 cents per transaction, plus five percent of the value of the transaction. In addition, it can add, under section 235.4, up to one cent if it qualifies under the issuer standards in section 235.4 to add a fraud-prevention adjustment to its per transaction fee.
Regulation II’s section 235.7 prohibits card issuers and payment card networks from restricting the number of payment card networks on which a debit card transaction may be processed to fewer than two unaffiliated networks. It also bans any restriction by an issuer or network that would inhibit a merchant from directing the routing of transactions for processing over any network that is capable of processing the transactions. There is no exemption from this requirement for small issuers.
Almost immediately after the Final Rules were published, various merchant groups started arguing that the Fed’s limits were excessive and arbitrary. Four major retailer trade associations and two individual retailers brought suit in the U.S. District Court for the D.C. District to overturn the Board’s rule. On July 31, 2013, the Court filed a Memorandum Opinion and an Order for Summary Judgment in the matter of NACS v. Board of Governors of the Federal Reserve System, finding that the Board “clearly disregarded Congress’s statutory intent by inappropriately inflating all debit card transaction fees by billions of dollars and failing to provide merchants with multiple unaffiliated networks for each debit card transactions.” In effect, the Court would have required the Board to revisit the rulemaking process after a reevaluation of congressional intent, but the regulation was allowed to stand pending completion of that process.
The Board appealed the district court’s findings and order, arguing that it had correctly applied the language of the law in its rulemaking. The U.S. Court of Appeals for the D.C. District agreed, and on March 21, 2014, ruled that the lower court had erred on that matter, and remanded the case to the district court. The Federal Reserve Board, however, was found to have missed the mark in its inclusion of “transactions-monitoring costs” in the fraud prevention costs that issuers are entitled to recover with the current one cent “fraud costs adjustment” that can be added to interchange transaction fees. The Appeals Court charged the Board with revisiting that portion of its rulemaking for additional investigation or explanation.
What it all means
Since the thrust of the retailers’ arguments revolved around the theory that the Board had ignored Congress’s intent when crafting the regulation, it’s not likely that there will be any change in the basics of the interchange transaction fee limit of 21 cents plus 5% of the transaction value. Where we may see some movement by the FRB is in its rule for the fee adjustment for fraud losses, once the Board has revisited its thinking on transactions-monitoring costs. Any change there, however, is likely to be minimal. For small issuers, the fee restrictions will continue to have only an indirect impact inasmuch as the fee schedules of major issuers have a dampening effect on the fees that all players can negotiate.
Regulation E slips earn another bank a penalty
By John S. Burnett
A savings bank in New Jersey was issued a Consent Order for a $35,000 civil money penalty in February for engaging in “unfair practices in violation of section 5 of the Federal Trade Commission Act, in that the Bank imposed burdensome requirements on consumers with respect to the electronic funds transfer error resolution process that were not in compliance with Regulation E, and did not afford the required protections against liability for unauthorized charges.”
Translated, that means the bank went beyond the bounds of the regulation by making its customers produce something the regulation doesn’t require in order to avail themselves of error-resolution procedures. The order doesn’t spell out what the bank required of its consumer customers, but there are two practices in particular that are fairly notorious for exceeding the limits of the regulation and the Electronic Fund Transfer Act. The first, requiring that a consumer reduce an error claim to writing before undertaking an investigation of the claim, has been discussed hundreds of times in BankersOnline’s Bankers’ Threads. The only part of the error resolution process that can be conditioned upon a written claim (as opposed to an orally-delivered claim) is the provisional credit to be given if a claim can’t be investigated and resolved within ten business days of receipt of the original (oral) claim.
The second practice that has created problems for financial institutions is the imposition of a requirement that consumers file and produce a copy of a police report in connection with some unauthorized EFT claims. It’s fine to ask a consumer to file such a report, even to encourage it. But requiring a police report as a prerequisite to accepting a claim violated both the requirements of the error resolution provisions of section 1005.11 but also the consumer liability limits of section 1005.6, which happens to be the other violation the New Jersey bank was found to have committed.