If you’re charging customers a fee each time an item is presented and returned for insufficient funds, you’ll want to make sure your disclosures accurately and clearly disclose this practice. Your Management should also understand there are both legal and compliance risks involved.
Recent class action lawsuits have …alleged breach of contract due to the omission of important terms related to the assessment of representment fees. Thus, we recommend you make sure your “Terms and Conditions” (or other account contract language) explain how items can be represented multiple times and whether multiple fees can be assessed.
In its March 2022 Supervisory Highlights, the FDIC stated disclosures and account agreements that indicate …one NSF fee would be charged “per item” or “per transaction...” were potentially deceptive or unfair, if they also … did not explain that the same transaction might result in multiple NSF fees if re-presented. In other words, your account opening disclosures also need to clearly reflect multiple insufficient funds, or NSF fees, can be incurred on a single transaction.
The FDIC also provided some ways to mitigate the potential risks, such as disclosing the following, in addition to the amount of any insufficient funds, or NSF fees:
- …whether multiple fees may be assessed in connection with a single transaction;
- The frequency with which such fees can be assessed; and,
- The maximum number of fees that can be assessed in connection with a single transaction.
Another thing to look at is your notification practices. When an item is returned unpaid, does your customer have the ability to avoid multiple fees?
Your account agreements and disclosures need to be abundantly clear as to whether multiple fees can be incurred when a single item is presented multiple times. Make sure your customers can’t claim they didn’t know.
We discussed this during our recent Deposit Compliance Q & A Forum. It’s FREE so head over to our store and give it a listen.
Published
2022/05/17
