FDIC provides guidance on multiple NSF fees for re-presented items

In its 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 the customer’s account. FDIC examiners have scrutinized this issue in recent exams, with some exams remaining open pending resolution of the issue.

In the Supervisory Highlights, 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 re-presentment 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 taken 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 “[w]orking with service providers to retain comprehensive records so that re-presented items can be identified.”

In its staff analysis of the issue, the American Bankers Association recommended that banks review their deposit account agreement to ensure it states clearly that a separate NSF fee will be assessed each time the same item is resubmitted against insufficient funds. ABA also encouraged banks, if scrutinized by a regulator, to explain the significant logistical challenges with identifying items that have been resubmitted by the merchant for payment against insufficient funds. ABA is updating its staff analysis of this issue to reflect the Supervisory Highlights.