The Federal Reserve has joined the FDIC and OCC in targeting how banks treat single items that are repeatedly rejected for insufficient funds.

Background: Some financial 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.

Fed Article: In a new edition of the Fed’s Consumer Compliance Outlook, the agency said examiners at more than one supervised institution have cited re-presentment fees as an unfair practice in violation of Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices. The article recommends refraining from charging re-presentment fees, informing examiners of third-party practices, and informing consumers to mitigate UDAP risk.

OCC Meeting: ICBA met this month with OCC officials to express concerns with that agency’s April 2023 guidance that says disclosures may be deceptive under Section 5 of the FTC Act if they do not clearly explain re-presentment practices. ICBA expressed concerns with the abruptness of the policy change and urged the OCC to refrain from issuing corrective actions for at least one year, provide reasonable time to update practices, provide specific language to revise disclosures, and allow account-status notifications to eliminate the threat of UDAP violations.

FDIC Guidance Update: The FDIC in June updated its supervisory guidance on multiple re-presentment non-sufficient-funds fees to clarify that it will not ask institutions to conduct a lookback review absent a likelihood of substantial consumer harm. ICBA leadership community bankers and staff called on the FDIC to rescind lookback requirements during a meeting with agency officials earlier this year.

ICBA Guide: With community banks reporting that the agencies are 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.

ICBA Contact: ICBA encourages community bankers to email Senior Vice President and Regulatory Counsel Rhonda Thomas-Whitley if examiners are requiring them to conduct lookbacks on re-presentments during agency examinations.