John Zasada, Compliance Consulting Director, Financial Institutions Group

On April 13, 2020, the Consumer Financial Protection Bureau (CFPB) issued an Interpretive Rule applying the Regulation E compulsory use prohibition to the treatment of pandemic relief payments. It means no person may require a consumer to establish an account for receipt of electronic fund transfers with a particular financial institution as a condition of employment or receipt of a government benefit.

The Interpretive Rule addresses the compulsory use prohibition by ruling certain pandemic-relief payments are not “government benefits” for the purposes of the Regulation E compulsory use prohibition. Specifically, government benefits do not include payments from federal, state or local governments if those payments are:

  1. Made to provide assistance to consumers in response to the COVID-19 pandemic or its economic impacts.
  2. Not part of an already established government benefit program
  3. Made on a one-time or otherwise limited basis
  4. Distributed without a general requirement that consumers apply to the agency to receive funds.

Consequently, a government agency can require consumers to establish an account with a particular financial institution as a condition of receiving pandemic relief payments if they meet the four conditions above.

For more information on COVID-19 regulatory compliance guidance, contact us today.