In case you haven’t heard, the FDIC recently has been scrutinizing how banks are treating single transactions that are repeatedly rejected for insufficient funds.
Guidelines for Insufficient Funds and Fees
Financial institutions may charge a non-sufficient funds (NSF) fee when a charge is presented for payment but cannot be covered by the balance in the account, and then charge additional NSF fees for the same transaction when a merchant re-presents an ACH payment or check more than once after the transaction has been declined.
Failure to Disclose Properly
Depending upon how this has been disclosed to your customers, your bank could be at risk for increased scrutiny. We are aware of several banks that have recently had examination findings related to this issue, including UDAAP violations, multiple-year lookback requirements, and remediation requirements.
This topic was covered in the FDIC March 2022 Supervisory Highlights in the section titled “Re-presentment of Unpaid Transactions: Heightened Risk for Section 5 Violations”. View the full article here:
If you have a concern or an upcoming exam, contact us for more information on this topic.
