Agencies Issue Overdraft Guidance

The FDIC and OCC issued supervisory guidance on consumer compliance risks associated with bank overdraft protection programs.

 

Authorize Positive, Settle Negative: Both agencies address “authorize positive, settle negative” transactions, in which institutions assess overdraft fees on a transaction that was authorized against a positive balance but settled against a negative balance. The agencies say these transactions are unfair, cannot be reasonably avoided by the consumer, and pose risks of violating Section 5 of the Federal Trade Commission Act.

 

Re-presentment Fees: The OCC guidance also addresses re-presentment fees, in which 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. The OCC guidance says disclosures may be deceptive if they do not clearly explain that multiple or additional fees may result from multiple presentments of the same transaction, while bank practices may also be unfair under Section 5 if consumers cannot reasonably avoid harm.

FDIC Supervisory Guidance on Multiple Re-Presentment NSF Fees

OCC Guidance on Overdraft Protection Programs