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Federal Register / Vol. 86, No. 16 / Wednesday, January 27, 2021 / Notices analyzed compliance obligations under State laws with respect to exercising setoff rights and/or garnishing government benefits. Failure to properly identify, analyze, and, as applicable, comply with State actions poses a risk that consumers might be deprived of the full use of government benefits. Such a failure could, in turn, under certain circumstances, constitute an act or practice that violates Federal consumer financial law.
For those institutions that did waive setoff rights in response to State actions discussed above or on their own initiative, other consumer risks were identified. Institutions used a variety of methods to waive setoff rights. These methods included refunding fees that contributed to a consumers account being overdrawn, permanently forgiving overdrawn account balances, and issuing checks to consumers with overdrawn accounts for the full amount of their EIPs or protected unemployment insurance benefits.
Institutions most frequently waived setoff rights through the issuance of provisional credits in the amount of the overdrawn account balances. These credits would then be revoked at a later date, potentially leaving some consumers with a negative account balance.
Waiver of setoff rights allowed consumers access to the full amount of government benefits. At several institutions, examiners found risk when the institutions failed to clearly communicate to consumers how and when provisional credits would be revoked. This risk was exacerbated if the institutions lacked a clear policy preventing assessment of an overdraft fee when the revocation of provisional credit resulted in a negative account balance. Consumer complaints indicated confusion about the use and revocation of provisional credits.
Examiners also observed a risk with respect to policies and procedures around the waiver or refund of account fees. In response to COVID19, some institutions expanded existing account fee waiver or refund policies either through a blanket waiver or upon consumer request. These institutions informed consumers of the changes on their websites or via press releases.
However, examiners observed a risk when the institutions failed to implement policies and procedures that clearly and consistently operationalized account fee waivers and refunds.

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Prepaid Accounts
Market Response to Consumers &
Industry Challenges Pandemic-related business closures led to millions of consumers receiving State unemployment insurance benefits.
For a period of time, the CARES Act enhanced the amount of unemployment insurance benefits that consumers received. Many States issue prepaid cards as a method for disbursing unemployment insurance benefits.
Aside from unemployment insurance benefits, some consumers received EIPs on prepaid cards. As a result, prepaid accounts experienced an unexpected spike in demand.
This rapid growth caused issues related to transaction and maintenance fees, service availability, and continuity.
The industry encountered difficulty in fully staffing call centers to quickly answer questions and resolve conflicts relating to the significant increase in volume and number of prepaid accounts. Although depository institutions issue prepaid accounts, they often contract with third-party service providers to assist in managing the accounts. The compliance infrastructure at these third parties is generally less mature, which exacerbates the potential for consumer harm caused by unforeseen changes in the prepaid marketplace.
Consumer Risk Prepaid account issuers generally made changes to address staffing challenges and operational difficulties caused by the COVID19 pandemic and the significant rise in volume and number of accounts. Nonetheless, examiners highlighted a few key COVID19 related risks with respect to issuers of unemployment insurance benefit prepaid accounts.
Due to surge in demand, one institution lacked sufficient supply of the required disclosures and privacy notices and, rather than delay account access, mailed the prepaid account information to consumers without the required disclosures and privacy notices. To mitigate the lack of paper written disclosure, the institution included the address of a website where consumers could review the information online. The lack of paper disclosures presented a risk of harm as these consumers did not receive disclosures that included the terms of use and privacy notices as required by law.18
These required disclosures cover, 18 Electronic Fund Transfer Act, 12 U.S.C. 1693
et seq.; Regulation E, 12 CFR 1005.15c1;
Regulation P, 12 CFR part 1016.

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among other things, the fee schedule and error resolution rights associated with the prepaid accounts. The institution addressed this issue by subsequently mailing the required disclosures and privacy notices to impacted consumers.
3.9 Small Business Lending The Bureau has supervisory authority over large insured depository institutions and insured credit unions, many of which have originated PPP
loans. Consistent with its authority to ensure compliance with the Equal Credit Opportunity Act ECOA, the Bureau conducted PAs to assess potential fair lending risks attendant to the institutions participation in the program. Below are the supervisory observations resulting from these PAs.
Market Response to Consumers &
Industry Challenges The COVID19 pandemic had a swift and dramatic impact on small businesses. Many small businesses were forced to shut down temporarily or reduce operations in response to mandatory State and local stay-at-home orders issued to reduce exposure to, and transmission of, COVID19. Small businesses also experienced a significant drop in demand for goods and services and disruptions in their supply chains. Because of these impacts, many small businesses experienced a sharp drop in revenue and increased economic stress.
To address this problem, section 1102
of the CARES Act amended section 7a of the Small Business Act, 15 U.S.C.
636a, to create a temporary small business lending program known as the PPP. Under the PPP, small businesses could receive loans from private lender to cover eligible payroll, costs, business mortgage payments and interest, rent, and utilities for either an 8- or 24-week period after disbursement. Each loan is fully guaranteed by the Small Business Administration SBA, which administers the PPP; small business borrowers do not have to make any payments during the first six months of the loan term and may receive a deferral up to one year; and small businesses may receive complete or partial forgiveness of their loans if they use their loans to cover certain expenses and meet other requirements. A wide range of financial institutions were eligible to participate as lenders in the PPP, including institutions that normally do not participate in the SBAs
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