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Re-presentment of Unpaid Transactions

4/21/2022

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By: R. Matthew Waters, Financial Institution Specialist

On March 31, 2022, the FDIC issued its Consumer Compliance Supervisory Highlights which covered the five most frequently cited Level 2 and Level 3 violations, examination observations, regulatory developments, and consumer complaint trends. A notable concern in the supervisory highlights was the re-presentment of unpaid transactions.

Financial institutions are increasingly being scrutinized for charging multiple non-sufficient funds (NSF) fees on the same item without clearly disclosing the effects of multiple presentments.  Further, some institutions provide on initial disclosures that one NSF fee will be charged “per item” or “per transaction” but do not clearly define those terms. The FDIC states that “there is risk of unfairness if multiple fees are assessed for the same transaction in a short period of time without sufficient notice or opportunity for consumers to bring their account to a positive balance.”

The FDIC also issued a number of risk-mitigating activities that financial institutions have employed including eliminating NSF fees altogether, charging only one NSF fee for the same transaction, and disclosing all conditions in which an NSF fee may be assessed.  It is recommended that institutions review their account agreements and consider changes to enhance the explanations of how overdraft and NSF fees are assessed. 

Your account agreement vendor may already have an enhanced account agreement that provides the additional information needed. Vendors generally offer several account agreement updates during the year as a result of litigation within the financial institution industry.  Any updates to account agreements must be sent to current account holders to inform them of the changes.  Simply providing the updated account agreement to new account holders going forward is insufficient. 

To see the full article, click the following link: Consumer Compliance Supervisory Highlights (fdic.gov)

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PAVE Action Plan

4/1/2022

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By: Kyle Tucker, Financial Institution Specialist

On June 1, 2021, an interagency initiative was launched to combat bias in home appraisals. The Interagency Task Force on Property Appraisal and Valuation Equity (PAVE) has been directed to evaluate the causes, extent, and consequences of appraisal bias and establish a transformative set of recommendations to root out racial and ethnic bias in home valuations. The Task Force believes that if the Federal Government advances equity in the appraisal process, it can also make substantial progress toward closing the racial homeownership and wealth gap.

Director Rohit Chopra issued a statement on March 23, 2022, regarding the final report of the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE). For more information on Directory Chopra’s statement and the action plan of PAVE, please follow the link below:
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https://pave.hud.gov/actionplan#summary

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UDAAP Examination Manual Update

4/1/2022

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By: Kyle Tucker, Financial Institution Specialist

The CFPB has announced that it will use UDAAP to target discriminatory conduct. CFPB examiners are being directed to apply the Consumer Financial Protection Act’s unfairness standard to conduct considered to be discriminatory if it is not covered by the Equal Credit Opportunity Act.

The CFPB has broad authority in protecting consumer from unfair, deceptive, or abusive acts and practices. The CFPA defines an act or practice as “unfair” if (1) it causes or is likely to cause substantial injury to customers, (2) the injury is not reasonably avoidable by consumers, and (3) the injury is not outweighed by countervailing benefits to consumers in competition.

In its official press release, the CFPB states:
"The CFPB will examine for discrimination in all consumer finance markets, including credit, servicing, collections, consumer reporting, payments, remittances, and deposits.  CFPB examiners will require supervised companies to show their processes for assessing risks and discriminatory outcomes, including documentation of customer demographics and the impact of products and fees on different demographic groups.  CFPB examiners will look at how companies test and monitor their decision-making processes for unfair discrimination, as well as discrimination under ECOA."

For an updated exam manual for evaluating UDAAPs, please follow the link below:
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https://files.consumerfinance.gov/f/documents/cfpb_unfair-deceptive-abusive-acts-practices-udaaps_procedures.pdf

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    Past Articles

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    2017 DBF Final Rulemaking
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    Beneficial Ownership Relief Extension
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    CFPB Annual Privacy Notice
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    Final Arbitration Rules
    FinCEN Finalizes Beneficial Ownership Relief
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    Restoration Of PTFA
    Rising Interest Rates Reg E
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    Second FAQs For Beneficial Ownership
    The Military Lending Act
    Visa Gross Negligence Change
    Visa & MasterCard Card Updater Services

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