The Cost of Not Complying

Chris Collver
May 3, 2010 | COMMENTS

Question: What is the penalty for not meeting the February 22, 2010 compliance deadline for the CARD Act requirements?

There isn't a specific penalty for non-compliance with the CARD Act provisions. Instead, we need to look at the penalties contained within the law and regulation into which these requirements were added—in this case, Truth in Lending/Regulation Z.

Come to think of it, this is a good opportunity to let you know the penalties and liability contained in several of the most common laws and regulations that credit unions must comply with.

Regulation B (Equal Credit Opportunity Act)

• Civil liability for actual and puni;tive damages in individual or class actions. Liability for punitive damages is limited to $10,000 in individual actions and the lesser of $500,000 or one percent of the credit union's net worth in class actions.
• Attorneys' fees and court costs may be recovered.

Regulation CC (Expedited Funds Availability Act)

• Civil liability for actual damages.
• For individual actions, additional amounts of not less than $100 or more than $1,000.
• Class action damages of the lesser of $500,000 or one percent of the institution's net worth.
• Attorneys' fees and court costs may be recovered.

NCUA Part 707 (Truth in Savings Act)

The provisions which provided for civil liability for violations of Truth in Savings were repealed effective September 30, 2001. However, see the discussion about regulator administra;tive actions below.

Regulation E (Electronic Fund Transfers Act)

• Civil liability for actual damages (treble damages for certain error resolution violations).
• For individual actions, additional amounts of not less than $100 or more than $1,000.
• Class action damages of the lesser of $500,000 or one percent of the institution's net worth.
• Attorneys' fees and court costs may be recovered.
• Criminal liability: up to one year imprisonment and $5,000 in fines for “knowing and willful” violastions.

Regulation Z (Truth in Lending Act)

This is the regulation that contains the CARD Act provisions.

• Civil liability for actual damages.
• Statutory damages of twice the amount of the finance charge, not less than $100 or more than $1,000 for certain specified violations.
• Class action damages of the lesser of $500,000 or one percent of the institution's net worth.
• Attorneys' fees and court costs may be recovered.

Bank Secrecy Act (BSA)

There are a wide range of possible penalties for non-compliance with the BSA. For example, incomplete or inaccurate CTRs can bring fines of $500 each. Failure to file a CTR within 15 days can bring fines of $10,000, with further fines of $10,000 for each day a required report is not filed. A pattern of negligent violations is subject to a fine of up to $50,000. Conviction of an intentional violation of the BSA can result in a civil fine of between $25,000 and $100,000, and criminal penalties of fines up to $500,000 and up to 10 years imprisonment.

A detailed listing of possible civil and criminal penalties may be found at 31 C.F.R. sect;103.57 and 31 C.F.R. sect;103.59.

Administrative Actions by Regulator

It's important to note the penalties above do not include administrative actions that the NCUA, a state regulator, or other federal regulator (e.g., the Federal Trade Commission) is permitted to impose on non-complying institutions. In addition to being noted in exam findings, non-compliance can lead to a Document of Resolution requiring credit union action and follow-up. Ongoing non-compliance can lead the regulator to issue cease and desist orders, assess civil money penalties (which begin at $5,000 per day of noncompliance, and go as high as $1,000,000 per day), or to even remove officials or place the institution in conservatorship.

That's it for this month. Until next time, remember: it's cool to know—and to comply with—the rules!

Chris Collver is a senior legislative and regulatory analyst for the California and Nevada Credit Union Leagues. This article was reprinted with permission from Credit Union Digest, the publication of the California and Nevada Credit Union Leagues.