NYDFS proposes limits on OD and NSF fees
In January, the New York Department of Financial Services announced proposed regulations to enhance consumer protections against unfair overdraft fees. These regulations ensure consumers will no longer be burdened with overdraft fees for minor transactions and require banks to provide timely notifications to consumers about overdraft fees to improve transparency. The proposed rules would affect New York state-chartered banking institutions (banks, trust companies, savings banks, savings and loan associations, and credit unions).
Key highlights:
- Overdraft fees would be prohibited for items of $20 or less, and would be capped at the amount by which the account is overdrawn
- Would set a maximum of three OD fees per day per account, and bar multiple fees for the same transaction
- Would prohibit charging “sustained,” “continuous” or “daily” overdraft fees for each day an overdraft balance is not repaid
- Would ban charging one fee for transferring funds from another account to cover an overdraft and then imposing a second fee for the overdraft itself
- Would prohibit NSF fees for EFTs that the institution declines instantaneously (or nearly so).
- Settling or completing EFTs in a manner that maximizes NSF or OD charges would be banned
- "Authorize positive, settle negative" (APSN) practices would be banned
- Most return deposit items fees would be prohibited
- If a payee represents a debit that was previously charged an NSF fee, subsequent NSF fees for representment of the same item would be banned
- Banking institutions would be required to notify consumers “via the most immediate and rapid means of communication” used by the institution to deliver written notices when an overdraft or NSF fee is likely to be charged in connection with an electronic debit. In addition, banking institutions would need to inform consumers after the first NSF or return deposit item charge in a calendar year, and 30 days in advance of any changes to overdraft or NSF fees.
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