On Thursday, August 18, 2022, the FDIC provided additional formal supervisory guidance on multiple re-presentment NSF fees that goes much further than the initial guidance provided via the Spring 2022 FDIC Consumer Compliance Supervisory Highlights. The initial guidance provided by the FDIC in March of 2022 gravitated more to the deceptive standard in UDAP and provided risk-mitigating steps such as providing clear disclosures as to whether multiple NSF fees may be assessed in connection with a single transaction, the maximum number of fees that can be assessed on a single transaction, and the frequency with which such fees can be assessed. The August Supervisory Guidance also focuses on the unfairness standard and notes, “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.”
It seems like charging multiple NSF fees on re-presented items is going to be a thing of the past or that at least most financial institutions should pause the practice until better disclosures of practices can be provided to customers. However, not charging fees on multiple re-presentments appears to be the safe decision at this time as the guidance does not define “a short period of time” and financial institutions have little power to determine how quickly an item might be re-presented by a merchant or other individual. Further, the FDIC makes it clear that financial institutions which have not self-identified and fully remediated the issue prior to an exam will face possible UDAP violations, along with restitution and possible civil money penalties.
The August Supervisory Guidance indicates that examiners will generally not cite UDAP violations if the issue has been fully corrected prior to the start of the examination. Further, it notes that a two-year lookback period for restitution of fees charged on multiple re-presentments was generally acceptable because of limited access to prior information. You can read the full FIL here:
Supervisory Guidance on Multiple Re-Presentment NSF Fees (fdic.gov)