In the latest issue of Consumer Compliance Supervisory Highlights, the FDIC addressed the charging of multiple non-sufficient funds fees for transactions presented multiple times against insufficient funds in a customer’s account. FDIC examiners have scrutinized this issue in recent exams, with some exams remaining open pending resolution of the issue. At least one Alabama bank has reported an incomplete exam over unresolved concerns on re-presentments, along with significant reporting requirements going back several years.
In the report, the FDIC discussed potential consumer harm from this practice in terms of both deception and unfairness under the Federal Trade Commission Act Section 5’s prohibition on unfair or deceptive acts or practices. The FDIC stated that the “failure to disclose material information to customers about representment practices and fees”—i.e., unclear definitions of “per item or “per transaction”—may be deceptive.
Additionally, the FDIC stated that the failure to disclose material information to customers “may also be unfair if there is the likelihood of substantial injury for customers, if the injury is not reasonably avoidable, and if there is no countervailing benefit to customers or competition. For example, there is risk of unfairness if multiple fees are assessed for the same transaction in a short period of time without sufficient notice or opportunity for consumers to bring their account to a positive balance.”
The FDIC listed a range of “risk-mitigating activities” that banks have undertaken to “reduce potential risk of consumer harm and avoid potential [UDAP] violations.” These include eliminating NSF fees, declining to charge more than one NSF fee for the same transaction, disclosing how NSF fees will be imposed, providing the customer with sufficient notice of the first NSF fee so that the customer can bring the account balance positive before the transaction is represented, ensuring the manner in which NSF fees are charged is “communicated clearly and consistently,” and “working with service providers to retain comprehensive records so that re-presented items can be identified.” Read the Supervisory Highlights.
