One of the hot topics during our Deposit Compliance Q&A Forum on May 5th was about charging multiple NSF fees on represented items. This has been the focus of some recent class-action lawsuits and it was also addressed in the FDIC’s March 2022 Supervisory Highlights. The FDIC specifically calls out agreements and/or disclosures that indicate NSF fees will be assessed “per item” or “per transaction” when, in fact, a fee will be assessed each time an item is presented for payment. Check out our May 17th blog for additional information.
The key to avoiding problems here is to ensure that both your account agreements and other account-related disclosures (fee schedules, etc.) are clear that NSF fees can be assessed each time an item is presented. We have seen instances where the account agreement is clear but the fee schedule only says “per item”.
We’ve also been getting a little feedback from banks on this. One bank was told by examiners they needed to do a look back before their upcoming exam and have a plan for going forward if they wanted to avoid a UDAAP violation. The bank proposed a one-year look back with restitution for affected customers which was accepted by their examiners. Another bank discovered on their own this was an issue and stopped charging a fee for represented items. Examiners cited them because they did not provide voluntary restitution to affected customers. In this case, they are potentially looking at a two-year look back.
TISA doesn’t require restitution, but since this is a UDAAP issue, all bets are off. It would seem the actual restitution would likely be less of a burden than the time and effort it takes to do the look back and identify affected customers. But, you also need to consider the potential legal and reputational risks.
Give our recent Deposit Compliance Q & A Forum a listen. It’s FREE!
Published
2022/06/07