The FDIC and OCC issued supervisory guidance on consumer compliance risks associated with bank overdraft protection programs.
Authorize Positive, Settle Negative: Both agencies address “authorize positive, settle negative” transactions, in which institutions assess overdraft fees on a transaction that was authorized against a positive balance but settled against a negative balance. The agencies say these transactions are unfair, cannot be reasonably avoided by the consumer, and pose risks of violating Section 5 of the Federal Trade Commission Act.
Re-presentment Fees: The OCC guidance also addresses re-presentment fees, in which institutions charge disclosed non-sufficient-funds fees for the same transaction when a merchant re-presents an ACH payment or check more than once after the transaction has been declined. The OCC guidance says disclosures may be deceptive if they do not clearly explain that multiple or additional fees may result from multiple presentments of the same transaction, while bank practices may also be unfair under Section 5 if consumers cannot reasonably avoid harm.
Reviews Encouraged: Both agencies encouraged financial institutions to review overdraft practices to ensure customers are not charged overdraft fees for transactions they may not anticipate or avoid.
Agency Meeting: ICBA leadership community bankers and staff last month met with FDIC officials on re-presentment fees, expressing ICBA’s concerns with the agency’s treatment of re-presentment fee disclosures since it issued supervisory guidance last August. ICBA called on the FDIC to rescind lookback requirements, focus on applying its new position on re-presented items going forward, and provide reasonable time for community banks to update their disclosures and practices to comply with the FDIC guidance.
ICBA Guide: With community banks reporting that the FDIC is imposing violations even on banks that are compliant with fee disclosure requirements, ICBA last year released a member-protected fact sheet on the issue with recommendations for reducing the risk of penalties.
