Potential Scrutiny Around Re-presented Transactions

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In case you haven’t heard, the FDIC recently has been scrutinizing how banks are treating single items 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: 

https://www.fdic.gov/regulations/examinations/consumer-compliance-supervisory-highlights/documents/ccs-highlights-march2022.pdf

 

If you have a concern or an upcoming exam, contact us for more information on this topic.

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