Five Recommendations For Customer Online and Mobile Banking Agreements

Patrick Neuman | 05.16.17

It’s no secret that bank customers are increasingly turning to online and mobile banking platforms for their day-to-day banking needs. As these platforms continue to expand and new services come on line, banks should pay special attention to the agreements and terms and conditions governing the relationship between the bank and its customers. Below are five issues for your bank to consider when designing the terms and conditions governing your online and mobile platforms.

1. Create a Comprehensive Agreement that is Easily Adaptable

On the consumer side, many banks are moving towards one agreement that includes both general terms for online and mobile banking and specific terms for certain services such as bill pay, person – to-person, and account-to-account transactions. The one-agreement approach allows bank customers to agree to terms and conditions for all services at the time of enrollment, as opposed to each time the customer initiates a specific service included in online or mobile banking. However, some third-party service platforms require consumers to agree to specific terms at the time of service enrollment, which may force the bank to include terms in a separate agreement. As a result, when banks purchase new services or switch to a new online or mobile platforms they can find themselves having to overhaul their online banking agreements. To address this issue, specific service terms should be located in separate ​“stand-alone” sections at the end of the agreement. This makes it easier for your bank to include new service terms or transfer existing terms into separate documents if required to accommodate a new platform.

The one-agreement approach is more difficult to implement for business customers. Many business services available through online and mobile banking, such as wire transfers, ACH origination and remote deposit capture, require in-depth terms and conditions that are better addressed by separate agreement. Additionally, business customers are more likely to not sign up for all available services at the time of enrollment. In the business context, we often suggest that banks create a master agreement with addendums governing specific services. The master agreement includes general terms for all services available through online and mobile banking, including service availability, cut-off times, available functions, limits on liability and indemnification responsibilities. Each specific service addendum incorporates the terms of the master agreement, and includes additional terms related to the specific service. 

2. Ensure Business Agreements Are Accepted By Authorized Individuals

When entering into online and mobile banking agreements with business customers, your bank needs to confirm that the individual signing on behalf of the company has the requisite authorization. Often, banks require a wet signature on such agreements along with a signed corporate resolution to confirm that the individual signing has proper authority. However, many banks wish to allow their business customers to electronically enroll in new or additional services, either for convenience, or because the software platform requires the customer to enter into new terms at the time of enrollment. One way to address this issue is to obtain a wet signature on the master agreement, and then include provisions in the master agreement that: (a) identify those individuals that will have access to services available through online banking; and (b) specifically authorize those individuals to accept terms for new or additional services on the company’s behalf.

3. Understand the Applicable Regulatory Framework

There are a number of federal banking regulations that your bank will need to address in its online and mobile banking agreements. Compliance reviews of these agreements during exams are increasingly common and regulators continue to publish guidance on these issues. Below are some of the more common regulations that should be addressed in online and mobile banking agreements.

• E‑SIGN. Reliance on electronic versions of disclosures related to loans, deposit accounts or banking services triggers E‑SIGN consent requirements. The E‑SIGN consent is typically included at the beginning of a consumer online and mobile banking agreement.
• Regulation E. Regulation E disclosures are required in consumer online and mobile banking agreements that govern EFT transactions. Under Regulation E, your bank must make disclosures at the time a consumer contracts for an EFT service or before the first EFT is made involving a consumer account. When drafting agreements, your bank should consider the point at which a customer is ​“contracting for a service”, and whether new Regulation E disclosures need to be provided at that time. Also, remember that under Regulation E, certain adverse changes require at least 21 days’ advanced notice.
• Regulation DD. Regulation DD applies to mobile deposits to individual accounts. Before adding mobile deposit features, your bank should send 30 days’ advance notice to existing customers if the mobile deposit service adds new transaction limits or fees. Such limits and fees should also be incorporated into your account disclosures and clearly described in your mobile deposit terms and conditions.
• Regulation CC. Certain provisions of Regulation CC apply to mobile deposit services. The general consensus is that the funds availability provisions of Regulation CC do not apply to images of the type transferred through mobile deposit. Therefore, it is important to include the mobile deposit funds availability terms in your bank’s mobile deposit terms and conditions and the bank’s funds availability policy. Terms and conditions should also address Regulation CC’s requirement to pay interest on funds deposited with mobile deposit upon receipt of credit.

4. Accurately Describe the Terms of Service

It is important for your bank to have a clear understanding of how the bank’s online and mobile banking services work in practice. Terms and conditions should accurately describe the services and bank and customer responsibilities. An inaccurate description of a service, lack of clear disclosure or a misstatement of a party’s responsibility under the agreement can expose the bank to liability and may trigger UDAAP or other regulatory concerns. For example, in 2016, the FDIC Chicago Region raised concerns that lack of clarity on terms of service related to collection practices could result in consumer harm. Ask your vendors to provide a detailed user guide for each service so you can confirm that the services are accurately described in your bank’s terms and conditions. 

5. Review (And Revise) Vendor-Provided Terms and Conditions

It is common for vendors to provide terms and conditions for the services they offer. Some vendors provide templates for the bank to modify, while others provide specific terms that the bank is required to use and allow only limited modifications. You should always review vendor-provided terms and conditions to ensure that they are consistent with your bank’s current agreements, include required regulatory disclosures and do not include terms that regulators may find objectionable. Many vendor-provided terms do not include certain terms to protect the interest of your bank, such as limitations on liability, customer indemnification responsibilities, choice-of-law and venue and limited warranties. Avoid accepting statements that the agreement is ​“standard” or ​“used with all our customer banks.” When possible, a prudent approach is to incorporate vendor terms and conditions into your own agreement to ensure compliance and consistency.

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