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Effective Date: Overdraft Protection Programs: Risk Management Practices

Summary

The Office of the Comptroller of the Currency (OCC) is issuing this bulletin to banks1 to address the risks associated with overdraft protection programs.2 Overdraft protection programs can present a variety of risks, including compliance, operational, reputation, and credit risks.3 Specifically, this bulletin discusses certain practices that may present heightened risk of violating prohibitions against unfair or deceptive acts or practices.

The bulletin also describes practices that may assist banks with managing overdraft protection program risks. When supported by appropriate risk management practices, overdraft protection programs may assist some consumers in meeting short-term liquidity and cash-flow needs. The OCC recognizes that some banks have announced changes to their overdraft protection programs that may be consistent with appropriate risk management practices.

This bulletin’s focus is consistent with the OCC’s mission to ensure that banks operate in a safe and sound manner, provide fair access to financial services, treat customers fairly, and comply with applicable laws and regulations. This bulletin also furthers the OCC’s support for innovation by banks to meet the evolving needs of consumers, businesses, and communities.

Highlights

This bulletin

  • provides background information on overdraft protection programs.
  • addresses certain practices that may result in heightened risk exposure, including the risk of violating section 5 of the Federal Trade Commission (FTC) Act (Section 5), which prohibits unfair or deceptive acts or practices,4 and Section 1036 of the Consumer Financial Protection Act of 2010, which prohibits unfair, deceptive, or abusive acts or practices.5 These practices include
    • assessing overdraft fees on debit card transactions that are authorized when a consumer’s available account balance is positive but later post to the account when the available balance is negative, also referred to as “authorize positive, settle negative” (APSN).
    • assessing an additional fee each time a third party resubmits the same transaction for payment after a bank returns the transaction for non-sufficient funds (NSF) (referred to as “representment fees”).
  • describes certain practices that may help to manage risks associated with overdraft protection programs, including
    • assisting consumers in avoiding unduly high costs in relation to the face value of the item being presented, the amount of their regular deposits, and their average account balances.
    • implementing fees and practices that bear a reasonable relationship to the risks and costs of providing overdraft protection program services.

https://occ.gov/news-issuances/bulletins/2023/bulletin-2023-12.html

  • April 26, 2023
  • Time: All Day
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