FDIC Issues Guidance on Multiple NSF Fees and Re-Presentment

Recently, the FDIC issued guidance on the subject of multiple non-sufficient funds (NSF) fees arising from the re-presentment of the same unpaid transaction.  The FDIC did not say that multiple NSF fees associated with re-presentment were prohibited under the new guidance, but explained that in consumer compliance examinations the FDIC has identified violations of law when financial institutions charged multiple NSF fees for the re-presentment of unpaid transactions when certain disclosures regarding the institution’s re-presentment practices were deficient.

Financial institutions charge NSF fees when checks or Automated Clearinghouse (ACH) transactions are presented for payment, but cannot be covered by the balance in the transaction account.  After the merchant is notified the transaction was declined, merchants may re-present the same transaction for payment.  Certain financial institutions charge multiple NSF fees for the same transaction that was declined and re-presented.

The FDIC specified that charging multiple NSF fees for the re-presentment of the same transaction may increase risks associated with Section 5 of the FTC Act, prohibiting unfair or deceptive acts or practices.  However, the FDIC provided a number of practices financial institutions have taken to mitigate risk of consumer harm and violations of law, in connection with multiple re-presentment NSF fees, including:

• Charging only one NSF fee regardless of re-presentment;
• Conducting a comprehensive review of policies, practices, and activities related to re-presentment and making appropriate changes, including revising disclosures for both existing and new customers;
• Clearly and conspicuously disclosing the amount of NSF fees to customers, including whether multiple fees may be charged for the same transaction, the frequency fees may be assessed, and the maximum number of fees that may be assessed in connection with a single transaction;
• Reviewing customer notification or alert practices related to NSF transactions to ensure customers have an ability to avoid multiple fees for re-presented items; and
• Eliminating NSF fees.

Earlier this year WBK covered an Industry Letter from the New York Department of Financial Services (NYDFS), where the NYDFS communicated that it expected regulated depository institutions to discontinue charging multiple NFS fees arising from the re-presentment of the same unpaid transaction.