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FDIC Issues Guidance on NSF Fees for Multiple Re-Presentments

On August 18, the Federal Deposit Insurance Corporation (“FDIC”) issued Financial Institutions Letter 40-2022 (“FIL 40-2022”), which provided supervisory guidance for state non-member banks and multiple non-sufficient funds (“NSF”) fees. FIL 40-2022 and its attached guidance is similar in content to an issue the FDIC highlighted in its March Consumer Compliance Supervisory Highlights

The FDIC stated that it is issuing the guidance because of its observations in consumer compliance exams where consumers are charged multiple NSF fees for the same transaction when a merchant resubmits the transaction for payment. The FDIC has also observed that some institutions’ disclosures did not adequately describe the institution’s re-presentment  practice. The FDIC stated that such practices could result in being deemed a violation of law in exams as an unfair and/or deceptive practice in violation of Section 5 of the FTC Act.  

The FDIC’s guidance encouraged institutions to consider implementing the following practices to mitigate the risks noted in the guidance:

  • Eliminating NSF fees.

  • Declining to charge more than one NSF fee for the same transaction, regardless of whether the item is re-presented.

  • Conducting a comprehensive review of policies, practices, and monitoring activities related to re-presentments and making appropriate changes and clarifications, including providing revised disclosures to all existing and new customers.

  • Clearly and conspicuously disclosing the amount of NSF fees to customers and when and how such fees will be imposed, including:

    • information on whether multiple fees may be assessed in connection with a single transaction when a merchant submits the same transaction multiple times for payment;

    • 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.

  • Reviewing customer notification or alert practices related to NSF transactions and the timing of fees to ensure customers are provided with an ability to effectively avoid multiple fees for re-presented items, including restoring their account balance to a sufficient amount before subsequent NSF fees are assessed.  

This guidance from the FDIC is fairly broad, and, interestingly, is not presented as interagency guidance. Arguably, it might have been more likely to see such guidance from the Consumer Financial Protection Bureau or the Federal Trade Commission. The FIL 40-2022 guidance also seems to toe the line (if not go beyond the line) of the federal banking agencies’ so-called 2018 Guidance on Guidance by seemingly giving a list of requirements for state non-member banks under the guide of encouragement. The Guidance on Guidance was codified as a final rule in 2021. For the FDIC, this rule can be found at 12 C.F.R. Part 302.       

© Copyright 2023 Cadwalader, Wickersham & Taft LLPNational Law Review, Volume XII, Number 245
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About this Author

Daniel Meade Bank Regulation Attorney Cadwalader Washington DC
Partner

Daniel Meade is a partner in Cadwalader’s bank regulatory practice in Washington, DC. He has substantial experience in sophisticated transactional bank regulatory issues, such as bank M&A, the Volcker Rule, bank powers, affiliate transactions, Basel III capital, tying, AML, sanctions, and Bank Holding Company Act issues.  

Dan most recently served as Senior Vice President and Managing Counsel at Wells Fargo, where he led a team providing advice to Wells Fargo’s Regulatory Relations and Government Relations and Public Policy functions....

202-862-2294
Mercedes Kelley Tunstall Partner Cadwalader, Wickersham & Taft LLP
Partner

Mercedes Kelley Tunstall is widely recognized as a legal leader in fintech, cryptocurrency and consumer financial services regulation and compliance.

Mercedes regularly counsels banks, lenders, payments companies, digital asset companies and fintechs regarding federal banking regulators and compliance with laws and industry standards. She also defends clients against enforcement actions taken by these regulators, including the Consumer Financial Protection Bureau (CFPB). As a former Federal Trade Commission (FTC) lawyer and bank in-house counsel...

202-862-2266
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