I am asking this question in regards to the new guidance regarding charging multiple overdraft fees for re-presentment of items. Our disclosures do not state a number in regard to the fees. I do not believe we have an issue- per say- But we are clarifying in our disclosures. Currently they read $X per returned or paid item. We have not self identified an issue. But we are going to make the following clarifications. We are going to clarify that we will charge fees for up to (4) re-presentments. We decided 4 to allow for two ACH presentments. However - we are unsure how to identify an ACH presentment since a check number is not reference. ( we are doing this per the guidance to identify the number of fees that can be assessed in connection with a single transaction) I am looking for feedback from banks that have went through exams that had this overdraft instance focused on. I would love to hear specifically from FDIC banks. I feel we do not need to look back through our customer accounts since we do not specify "one" currently in our disclosure but use the work "per". I look forward to hearing from other banks on this subject.

i'll tell you what they told us, if you do not use clarifying terms to state presented items for the 1st time, and represented for subsequent, you have a UDAP issue.

to identify an ACH, it must say "RETRYPYMT" or "REDEPCHECK" in the company entry description, per Nacha rules.

and the maximum number of reprensentment tries is 3, a combination of check and ach.

Curious if any banks have felt compelled to do a self lookback before being asked to yet.

We have looked at our disclosures (account agreement language), and believe it is sufficient for the time being.

We are six (6) months out from our last FDIC compliance exam, with the next tentatively scheduled three (3) years from the end of the last. Of course we also monitor complaints.

I kind of feel like this is a trickling down of the CFPB's UDAP exam manual (policy) to the community bank level. Whereas I was saying that the CFPB's policy was more of a "big bank" problem to monitor enforcement actions of, this seems more immediate to my world of regulatory risk management.

When changing the disclosures and delivering them to current and new customers - is it required to send a whole new TISA or is it okay to send just the "common features disclosure" that has our fees listed. Our TISA does reference the customer to this document to communicate the fees. We use BPM with FISERV for our disclosures.

It's not a TISA (Regulation DD) requirement. You could put it on your TISA though.

I imagine a lot of banks will use their open language field on their TISA disclosures to address this from a disclosure perspective. Seems like a really good place to put it.

I disagree. The TISA requirement in 1030.4(b)(4) says "(4) Fees. The amount of any fee that may be imposed in connection with the account (or an explanation of how the fee will be determined) and the conditions under which the fee may be imposed."

The FDIC considers it unfair that the OD/NSF fee disclosure does not adequately disclose the condition that a fee will be charged for the same item if it is presented for payment multiple times.

The change in terms does not have to include the entire TISA. If you elect to provide a new TISA, then you must highlight the fee disclosure in some way so the consumer can see what is changing.

OFFICIAL INTERPRETATION OF SECTION
Section 1030.5--Subsequent Disclosures
(a) Change in terms.

(a)(1) Advance notice required.

1. Form of notice. Institutions may provide a change-in-term notice on or with a periodic statement or in another mailing. If an institution provides notice through revised account disclosures, the changed term must be highlighted in some manner. For example, institutions may note that a particular fee has been changed (also specifying the new amount) or use an accompanying letter that refers to the changed term.

I was referring to the practice, not necessarily the fee disclosure.

In other words, using the additional language fields (standard on most systems) on the TISA to explain how a consumer may incur multiple NSF charges for represented items.

Since it is not a required TISA disclosure, a change-in-terms would not be required.

12 CFR §1030.5(a)(1)

"A depository institution shall give advance notice to affected consumers of any change in a term required to be disclosed under Sec. 1030.4(b) [...]"

1030.4(b)(4) is a term required to be disclosed under Sec. 1030.4(b) [...]". If we are changing the conditions of how/when a fee is imposed and it results in more fees being charged (multiple fees for one item vs. one fee for one item) that requires a change in terms.

The FDIC Supervisory Guidance makes this pretty clear.

"Promptly correct NSF fee disclosures and account agreements for both existing and new customers, including providing revised disclosures and agreements to all customers; "

We currently have the required language (at least I believe it's the correct language) in our Deposit Account Agreement. During a recent UDAAP review, they mentioned to us that another client of theirs was just hit during an FDIC exam because it was not listed in other disclosures. We were advised to add the same language to our fee disclosure and our EFT disclosure. This was before the supervisory guidance came out from FDIC. Our reviewer stated their other client was required to go back 2 years and refund any additional fees (by the way, this client of theirs also had the same language we have in our Deposit Account Agreement, in their Deposit Account Agreement). FDIC stated it was not enough.

We have an FDIC exam coming up in October and we are currently working on our request list. I have added the language suggested to our fee disclosure (our TIS disclosures already state "see our fee disclosure for additional fees) and I am working on getting it added to our EFT disclosure. Our forms vendor isn't moving as quickly as I would like.

I guess we will see what happens in October. They already mentioned in our pre-exam phone call that re-presentment would be a big thing being looked at.

How are you addressing the "unfair" aspect of the new FDIC guidance? I'm specifically looking at these sections:

Unfair Practices: In certain circumstances, a failure to adequately advise customers of fee practices for re-presentments raises unfairness concerns because the practices may result in substantial injuries to customers; the injury may not be reasonably avoidable; and there may be no countervailing benefits to either customers or competition. In particular, a risk of unfairness may be present if multiple NSF fees are assessed for the same transaction in a short period of time without sufficient notice or opportunity for customers to bring their account to a positive balance in order to avoid the assessment of additional NSF fees. While revising disclosures may address the risk of deception, doing so may not fully address the unfairness risks.

and

Reviewing customer notification or alert practices related to NSF transactions and the timing of fees to ensure customers are provided with an ability to effectively avoid multiple fees for re-presented items, including restoring their account balance to a sufficient amount before subsequent NSF fees are assessed.

Any idea what sufficient notice to restore account balance before subsequent fees are assessed might be?

Anyone that's examined by someone that's not the FDIC heard of the unfairness test being used for properly disclosed representment fees?

For those of you who are considering not charging multiple presentment NSF fees, will you do this for consumer and commercial accounts or just consumer? The Guidance is not clear, but I know UDAAP covers both.

There is always the option of doing away with the fee. Before spending any time on updating disclosures, it would seem logical to know what fee income is generated before making a decision. Fees may being waived and the bank may not be generating much income.

As for ACH transactions, "to identify an ACH, it must say "RETRYPYMT" or "REDEPCHECK" in the company entry description, per Nacha rules." My understanding is that merchants do not always enter the code.

In Fairness hit the nail on the head. There is still a perception of unfairness in all of this even if you change your disclosures to clarify that the customer will be charged for a re-presented item.

"Reviewing customer notification or alert practices related to NSF transactions and the timing of fees to ensure customers are provided with an ability to effectively avoid multiple fees for re-presented items, including restoring their account balance to a sufficient amount before subsequent NSF fees are assessed."

What is in place to let customers know they need to make a deposit?

Consider that many large banks have completely done away with NSF fees.

Throwing in my two cents - we are also looking at how to handle these. We are updating disclosures to state "you MAY be charged", and we are also implementing a manual process for trying to find re-presentments so that we can waive the NSF fees on them. As stated above, not all re-presented items are properly coded, so the manual process for seeking them out is very tedious.

Management has considered the possibility of waiving all NSF fees, but we do not have an OD program, so we do not obtain opt-in. I see a big UDAAP problem with waiving NSF but not OD fees, given it's the bank who chooses whether we pay an item or not - the customer doesn't usually have the option to choose. Management isn't ready to implement a formal OD program, nor are they ready to waive all OD and NSF fees.

Sticky. Our next FDIC exam should be sometime in the next 6-9 months; we're doing what we can to complete a lookback (manually!), update disclosures, and implement (manual!) processes to prevent future NSF on re-presented items. Oh - and also pressure our core provider to come up with something to help (thanks for the comments above to that effect).

then the originator (merchant) is in violation of the Nacha rules. however, as the RDFI, you would have no way outside of the above to discern represented items.

Anyone had any feedback from their regulator as far as business accounts are concerned?

FDIC Compliance exam coming last week of September. FDIC warned me on phone they will be taking a hard look at overdraft fees. Bank changed OD disclosures about a year ago to define exactly what we do and what we charge a fee for. Our core data processor is looking into how to tell re-presentments from initial presentments, per data processor and our lead of operations at bank it is very difficult to discern this on face value; especially if someone uses lets say pay-pal for multiple $50 transactions for gambling. Bank is Ad Hoc with no opt in or out. I will try to let y'all know how exam turns out if I survive.

yep - ALL accounts must be reviewed, consumer and business

If possible to capture, we are considering calling customers when we receive a represented item. But wouldn’t that run afoul of the Telephone Consumer Protection Act since it's not related to fraud, identity theft, or information breach (if we don’t have preconsent)?

The FDIC incorporated the CFPB UDAAP exam manual into their consumer compliance exam manual as a resource for examiners.

calling them for what purpose?

It’s a consideration for timely customer notification or alerts to assist in providing an ability for them to avoid multiple fees on the representments.

Bottomline is you cannot charge them another OD fee for a representment - I am at a loss as to what a call is going to do?

The problem is that even with that policy, at this point, some core processor haven’t provided releases to capture when items are represented. Also, I understand that some merchants don’t always return ACH items with the correct does. So we are trying to address the unfair practices of the FDIC guidance that states “In particular, a risk of unfairness may be present if multiple NSF fees are assessed for the same transaction in a short period of time without sufficient notice or opportunity for customers to bring their account to a positive balance in order to avoid the assessment of additional NSF fees. While revising disclosures may address the risk of deception, doing so may not fully address the unfairness risks”

That unfair piece is what I'm struggling with. What is "sufficient notice or opportunity"? We send out the NSF notices daily but the customer may not get the mailed notice for one or two days. We offer e-notices and low balance text alerts but few people use them. Has anyone heard anything on what the expectation is?