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August 16, 1999 To: Board of Governors From: Winthrop Hambley ZcflJ Re: Electronic Delivery of Disclosures The Board will be considering a proposal to allow electronic delivery of certain consumer disclosures on Wednesday. The Board should be aware of two related matters in addition to the information it has already received. First, seven House Members, Reps. John LaFalce, Bruce Vento, Gary Ackerman, Luis Gutierrez, Barbara Lee, Ken Bentsen, and Dennis Moore, have sent the Board a letter, dated August 6, 1999, expressing concerns about electronic delivery of consumer disclosures. Second, Reps. Marge Roukema and Rep. Rick Lazio, along with Rep. Jay Inslee, have introduced legislation, “the Electronic Disclosures Delivery Act of 1999,” to permit electonic delivery of consumer disclosures. The letter and statements by Roukema and Lazio introducing their legislation are attached. Attachments August 6, 1999 Mr. William Wiles Secretary Board Of Governors Of the Federal Reserve Board 20th Street and Constitution Ave Washington, D.C. 2055 1 F.e. Electronic Fund Transfers - Reglulation F.: Docket No R- 1002 Truth in Savings - Regulation M, Docket No. R-1003 Consumer Leasing - Regulation M; Docket No R- 1004 Truth in Lending - Regulation Z, Docket No R- 1005 Equal Credit Opportunity - Regulation B, Docket No R- 1006 Dear Secretary Wiles. Last year, the Board issued proposed regulations which would allow disclosures under these five federal consumer protection -statutes to be made electronically. The proposed regulations, which would have allowed electronic disclosures once the parties agreed, would be tantamount to repeal of the disclosure requirements of these laws We are concerned that the proposal may go far beyond the Federal Reserve Board’s capacity to implement regulations under these federal consumer protection laws In their current form, these proposed rules could undermine and change the requirements of these statutes and as such, we strongly encourage you to proceed with extreme caution, listening carefully to concerns from all sides and absolutely maintaining consumer safeguards and all legal remedies currently available. Recently, the FRB staff has been circulating papers which indicate a few more specific requirements may be added. However, the new requirements appear to be negligible and still indicate less fidelity to the overriding importance of ensuring that consumers actually receive their federally mandated disclosures, especially with regard to loans secured by a home and other property. While we can understand the need to allow electronic disclosure when the consumer initiates the relationship with the financial institution or creditor electronically from their own home, this does not necessarily justify the elimination of paper disclosures which should be required in most cases Any regulations should not undercut the intent of the laws we passed to protect consumers in any way Convenience of application and service should not be at the cost of consumer disclosure, safeguards, protection (download technology and rights. Further regulations should deal with a number of significant consumer concerns, including ensuring I) the consumer actually has the capacity to receive and print) the disclosures electronically, 2) that the disclosures are only provided via a that assures their integrity from tampering, 3) that the consumer is always able to receive paper copies, and 4) periodic inclusion of printed disclosure safeguards and rights in billing statements and consumer communications. Every precaution should be taken to ensure that the disclosures required under these laws are provided and received by all consumers. Certainly the Board should move very cautiously and carefully on these matters. V - Brxe F. Vent@ Member of Congress Member of Congress uf ember of Congress Gary qkerman Memb& of Congress 7?L%JUL Ken Bentsen Member of Congress Dennis Moore Member of Congress Barbara Lee Member of Congress July 28, 1999 CONGRESSIONAL RECORD - Extensions PreventiOn. Bureau of HIV/AIDS Care and take full advantage of the current technologyand if we are to keep technology from leaping Prevention Services, in recognition of his dedication and service to the State of Missouri in far ahead of the ability of our nation’s laws to regulate it. advocating for people living with HIV/AIDS and The Electronic Disclosures Delivery Act adthe prevention of the spread of HIV. Mr. dresses the electronic delivery of disclosures, Gooden was also honored by Kansas city Mayor Emanual Cleaver and the City COUnCil notices and other information over the Internet. It allows these actions to be provided with a resolution and proclamation recognizing his election as Chairman of the Board Oi eiecironicaiiy, but does noi iessen ihe rights or NAPWA and for his dedicated Service and ef- responsibilities of any party or affect the content of any disclosure, including both the tim forts in the fight against AIDS. ing, format and information to be provided. NAPWA is an active and effective organizaThis legislation is a first step toward making tion, providing many services to legislators on-tine financial transactions practical. It would and people with AIDS/HIV. For instance, put Congress on record as committed to playNAPWA provides Community Education, ing a leadership role in promoting electronic Technical Assistance, and Regional Training ..I~ 1 . _A.. corn,mrice whffe pieseiv;ng arti, indeed en_ worksnops arouno me country for peopie witt hancing consumer protections. Mr. I-AZIO and HIV. to give them the skills they need to parI plan to hold hearings in our respective sub ticipate in HIV prevention community planning committees to ensure that all interested parwith Ryan White CARE Act Planning Bodies. ties’ views are heard. NAPWA also coordinates a diverse national On-line disclosures will provide consumers networKof committed public speakers through the Leadership Development Initiative. This with a number of benefits: Convenience and time-saving--Consumers initiative, coupled with the Youth Initiative involves outreach services where peers talk to can conduct transactions virtually anywhere and at any time, 7days-a-week, 24-hours-apeers about AIDS and HIV, encouraging each other to modify risk behaviors and change at& day. User friendly informatio+-Legalistic jargon tudes toward people with AIDS/HIV. NAPWA also participates in a wide array of in on-line disclosure forms can be linked to plain-English definitions, making them much prevention, health promotion, and educational Conefforts for those infected with and at risk for more readable and understandable. sumers can electronically search documents HIV. NAPWA publishes several fact sheets, alerts, and reports, as well as supporting an rather than reading through reams of paper. Enhanced services for under-served wmInformation and Referral Service, to provide munities-Rural and urban communities will the nation with up-to-date and accurate inforhave enhanced access to financial services, mation about the AIDS pandemic. NAPWA also sponsors National HIV Testing Day in even where brick and mortar branches are not June of each year, to encourage early and fre- available. In areas where residents cannot afquent testing for HIV/AIDS. especially for ford computers. libraries and schools provide on-line access. those who are at higher risk, Reduced cost-Electronic delivery of disclcMr. Speaker, NAPWA’s highest priority is sures will cost less than providing the same the development of effective new treatments and a cure for HIV disease. Please join me in information on paper or paying employees to commending NAPWA for its tireless efforts on handle face-to-face disclosures. Competition should encourage business to pass on those behalf of people with AIDS. savings to consumers. CI,ondressional on electronic disa-.-?- ---.-- -. nuidance ELECTRONIC DISCLOSURES closures is needed immediately, given that DELIVERY ACT OF 1999 most of the consumer protection laws now on ( r the books were enacted before the Internet became popular. Congress should provide uniform standards so that disclosures will be deOF NEWJERSEY livered to wnsumers under the same set of IN THE HOUSE OF REPRESENTATIVES rules by all financial service providers. Tuesday, July 27, 1999 Some regulators, notably the_Fe&ral ReMrs. ROUKEMA. Mr. Speaker, millions of serve have begun to address these issues. consumers today routinely conduct business &hers have not, as in the case of the Deover the Internet. buying and selling a myriad partment of Housing and Urban Development with respect to the Real Estate Settlement of products and services from companies Procedures Act. Congressional action would large and small, near and far. Many of these provide uniformity and clarity among the agenconsumers already conduct much of their banking business over the web, checking bat- cies and provide guidance from the only body with the authority to amend the laws in quesantes, transferring funds and paying bills without leaving their homes. This explosion of on- tion. In sponsoring this legislation, we want to line banking offers great benefits on both make clear that we do not intend to discourSides of the transactions: even the tiniest small-town bank can have access to a na- age the Federal Reserve from moving ahead. Instead, we want to encourage other agencies tional marketplace, while consumers can comparison shop for the best interest rates or to follow the Fed’s example. If anythrng, we activity in this services. Nonetheless, the delivery Of many fi- hope the pacxregulatory nancial services over the Internet, such as area will be stimulated by congressional interloans and mortgages, are limited by anti- est and action. Congress and the regulators must play a quated laws requinng paper documents or face-toface transactions. leadership role in updating many of the conThat is why 1 am joining today with Consumer protection laws to reflect new tech gressmen RICK LAZ~Oand JAY INSLEE to intronologies and establish a coherent legislative duce the Electronic Disclosures Delivery _ , Act _. of _ framework for the dellvery of financial se&es 1999. This legrslation is necessary if we are to through electronrc commerce. Wrth the Intro- HON.hfARGE ROUKEhlA El673 of Remarks duction of this legislation, we can begin the debate that set us on the path to enacti% responsible legislation that will enhance consumer access to financial services while maintaining appropriate consumer protections. DISCLOSURES SUMMARY OF THE ELECTRONIC DELIVERYACT OF 1999 The “Electronic Disclosures Delivery Act of 1999” (the Act) amends the Truth in Lending Act, the Equal Credit Opportunity Act. the Fair Credit Reporting Act, the Real Estate Settlement Procedures Act, the Truth in Savings Act and the Consumer Leasing Act to provide for the electronic delivery of disclosures, notices, and any other information that is required to be given to consumers under these acts. The legislation provides that acknowledgments given in connection with disclosures or notices may also be provided electronically. Creditors may rely upon the use of electronic communications or acknowledgments to satisfy requirements for delivery of disnotices and other information closures, through electronic communications provided that the consumer: Expressly consents to online disclosures and/or acknowledgments and does so electronically; receives a description of the type of information to be provided electronically; receives an explanation of how to access and retain the online disclosures, including consideration of the consumer’s ability to print or download such disclosures: and receives a notice of the period of time that the information will be available to the consumer in electronic form. The legislation provides the appropriate regulator with the authority to prescribe regulations from time to time to clarify the procedures applicable to the delivery of electronic communications. The legislation further provides the appropriate regulator with the authority to prescribe, without affecting or impairing the legal effectiveness of the delivery of any electronic communication provided for in the Act, procedures which provide consumers with the option to request paper copies of any such communications if it finds that such procedures are necessary and appropriate to supplement electronic communications. Tine iegisiacion would be effective upon date of enactment. The legislation addresses onlv electronic delivery of information to.consumers. It does not affect the substantive rights and responsibilities of any party or the content of any disclosure, including both the timing and format of disclosures and the information to be provided. RECOGNIZING HOME HEALTH THE PLIGHT OF CARE AGENCIES HON.J.C. WATJS, JR. OF OKLAHOMA IN THE HOUSE OF REPRESENTATIVES Tuesday, July 27, 1999 Mr. WATTS of Oklahoma. Mr. Speaker, there is a growing concern over the devastating situation that is plaguing Home Health Care Agencies in this country. Today I am introducing the Medicare Home Health Services Equity Act of 1999 to provide greater equity to Medicarecertified home health agencies, and to ensure access to medicare beneficiaries to medically necessary home health services furnished in an efficient manner under the Medicare Program. Quality, efficient home health care agencies are sufferinnJ Ilnder the r-.-.-.-mrnitivn !niertg Pay-“--’ ment System and are going out of business. CONGRESSIONAL July 27, 1999 RECORD -- Exrensiorzs El659 of Remarks EXTENSIONS Cd? REMARKS THE INTRODUCTION CARE GLAUCOMA ACT OF 1999 OF THE MEDIDETECTION HON.hiARKFOLEY OF FLOWnA IN THE HOUSE OF Tuesday, REPRESENTATIVES July 27. 1999 Mr. FOLEY. Mr. Speaker, I am pleased to Introduce the Medicare Glaucoma Detection Act of 1999 today. Although It IS not a disease that IS always at the forefront of our attentton, glaucoma is a significant cause of legal blrndness in this country. An estrmated 80,000 Amerrcans are blind because of thrs disease. Alarmingly, _at least two mrllron individuals have glaucoma and estimates show that at least half of them are not aware of it. Medical science has shown that glaucoma can be prevented or delayed through early diagnosis and treatment. Preliminary data ~ndrcates that early detection In many cases can lead to treatment through pharmaceutical Intervention rather than through surgery. I see no reason that America’s seniors should risk losing their sight, and consequently their inde pendence. from glaucoma if we can effecttvely identify and treat this disease early. Unfortu nately. current Medicare coverage of glaucoma testing is Inadequate. Current coverage IS only available for those who show clearly rdentrfiable symptoms of the disease. However, for many people. thus could be too late. The Medicare Glaucoma Detectron Act wtll expand coverage of glaucoma testtng to Inciude aii ‘Medicare paiienis 65 and oider. Medicare-eligible rndrviduals aged 60 to 64 who have a family htstory of glaucoma and other high risk populations rdenttfted by the Secretary of Health and Human Servrces. Covered services will include a series of tests whtch must be performed In combination by an ophthalmologist in order to successfully de,.?,-* ,Cn rl;roaro ,czL,, ,I Ici “IJGjOJG. Preventive care, like early disease testrng, has proven to be highly eHectrve tn reductng the seriousness of many diseases and in tmproving the recovery time and quality of irfe for those who suffer from them. It only makes sense that coverage of glaucoma testing should be expanded in Irght of the known value of preventive care. Therefore, I would encourage my colleagues to fotn me in sup porting this bill RECOGNITION OF S. 76. THE TRAFFIC ENFORCEMENT STATISTICS BILL AS INTRODUCED BY STATE SENATOR FRANK W BALANCE. JR., RALEIGH. NORTH CAROLINA HON.BOB ETHERIDCE IN THE HOUSE Tuesdny, Mr. ETHERIDGE proponent of equal OF KEPRE:SENTATIi~E5 July 27. 1999 Mr. Speaker, enforcement as a strong and protec- tions under the law, I rise toddayto Callthe attentton of the Congress to North Carolrna Senate 6111 (SB) 76. “TraHtc Enforcement Statistrcs” legrslation Introduced by North Carolina State Senator and Deputy President Pro Tern pore Frank W. Balance, Jr. Governor James 0 U,.“ , n‘ hln,+h rrre,:..?. ^.,.^^rl CD ;-,,. “. II”III “I I”“ILII ~cII”III,d aryrrt.?u Jla 7c ,u II,,” law on April 22, 1999. SB 76 will greatly assrst in determrning whether mrnorrtles are treated farrly by highway patrols along North Carolrna roads and highways by requiring troopers to record the race, age and sex of every driver stopped as well as to cute the reason for partrcular stops. The collected data will be presented by the Attorney General’s OHice in a biennial report to the General Assembly. As the chtef sponsor of the bill, Senator Balance argued that “there should not be a crime called ‘driving while black.’ ” Mr Speaker, SB 76 can serve as a viable model for other states experiencing similar concerns about equal enforcement of traffic laws as well as for our natron. To provide you wrth more detailed information regarding this important legtslation. I am submitting the text of SB 76 along wrth an article from the Raleigh News 8 Observer. I encourage my coleagues to read this article and consider SB 76’s applicability for your states and on the federal level. !‘ ELECTRONIC DELIVERY DISCLOSURES -?\ \ AC’!? I OF 1999 HON. RICKL&IO OFNEWYIJRK IN THE HOUSE Tuesday. OF REPRESENTATIVES July 27, 1999 Mr. LAZIO. Mr. Speaker, Today, I )orn Congresswoman ROUKEMA and Congressman INSLEE In Introducing, The Electrontc Disclosures Dellvery Act of 1999. The legislation address,nrro.,.z,nn ,,?I‘ nf3 “ rr\mn,>tnro es !he raptd!L’ “ ‘ti,ccIJ”‘y I” ,_ ? “ ““‘IJULC’~ and telecommunications technology in the delivery of financial products and services of all kinds. Providing financial services such as mortgages, Insurance and securities over the Internet IS redefining the bankrng and investment Industries and promises to be an area of explosrve growth over the next five years. The leglslatron only addresses electronic delivery of rnformatton to and from consumers and frnanctal servrces providers. It does not affect the rights and responsibilrties of any party or the content of any disclosure. including both the trmrng and format of drsclosures and the rnformatron to be provrded. The brll makes It possible for these dtsclosures to be grven to the consumer eHrctently and In a more user friendly format than IS currently the practrce. Over the Internet. consumers will be able to conduct transactrons virtually anywhere and at any time. 7-days-a-week, 24.hours-a-day. Internet commerce wrtl Increase consumer convenrence. through reduced costs and more “one-slop shopplng.” Many of the lederal laws that regulate mongage transactrons. includrng the Real Estate Settlement Procedures Act (RESPA), mandate the delivery of drsclosures to consumers. However, In most cases, these laws were adopted to apply to lace-t&ace or paper transactions, and do not eastly accommodate on-line transactions. RESPA is a statute that has not been ,.r.n mm rnntm\,Prr\,-l.n\r wn, 2,“s ,a ttl3.t ,,cjrj ‘ ,,“ I,( U” “L*“.-cd, “.U”, ..““I”,,,I u,yu<II”. substantrve provtsions of that law are In need of clanfrcatton. However, the legislation that we are rntroducrng today focuses only on the electronic delfvery of dtsclosures. I believe that the on-line dellvery of disclosures deserves review apart from the overall RESPA reform. Let me give you a sense of the impact of the Internet on the financial servtces industry: Internattonal Data Corporation lorecasts that total worldwrde commerce on the Internet will grow from an estimated $32.4 brllron in 1997 to an estimated S425.7 billlion in 2002. Accordrng to Jupiter Communications, the number of on-line banking households in the United States IS projected to grow from an estimated 4.5 million in 1997 to an estimated 17.1 mrllion In 2002. Jupiter Communications further Indicates that the percentage of these on-line bankrng households utrlizrng Internet to rise from an estimated banking IS projected 8 percent In 1996 to an estimated 80 percent in 2000. A recent Forrester Research, Inc. report indicates that by the year 2003. nearly 9100 billlion or 10 percent of the mortgage market will be generated online, while other reports prefect the market share for Internet onginatrons to be as hrgh as 30 percent by the year 2005. The Forrester study also indrcated that in the view of the financral servrces Industry one of the pnncrpal impediments to progress In the offering of mortgages over the Internet is outdated laws and regulations. The Congress and the regulators must play a leadership role in updating many of the consumer protection laws to reflect new tech nologres and establish a coherent legrslative framework to deliver financial servrces and products through electrontc commerce. As chairman of the Housing Subcommtttee I look forward to working with Congresswoman RouKEMA and Congressman INSLEE to promote these legislative changes that will enhance consumer access to financial products while maintarnlng appropriate consumer protectrons. THE NAVY AND VIEQUES HON.TONY P.HALL OF OHIO ih’ THE HOUSE Tuesday. OF REPRESENThTI\‘ES July 27. 1999 Mr HALL of Ohio. Mr. Speaker, rn Apnl. U.S F-18 frghter lets accidentally dropped two 500.pound bombs on an observatton post nearly a mile from their target on the Puerto Rrcan Island of Vreques. krlltng a ctvrlran and wounding four others Although Vreques has housed a naval Iwe-fire trarntng facrlrty for over 50 years, there are 9,300 ctvrlrans who live on the Island. a