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- Hi, I'm Victoria Stephen
and this is your Compliance Minute.
As you may be aware, NSF Representment
is coming under increasing scrutiny lately.
NSF or non-sufficient funds fees refers
to fees that the bank charges its customers
when the bank returns a check or electronic payment
after determining that the customer's deposit account
does not have sufficient funds.
NSF Representment is referring to the practice
of charging multiple NSF fees,
each time an item is represented for payment.
There are several separate issues
that are currently being scrutinized in this area.
One is whether the account agreement
has clearly stated that a separate NSF fee
may be charged for each representment.
Another is whether this potentially unclear language
in the account agreement
could be considered deceptive.
And yet another is whether the very practice
of charging multiple NSF fees
for the same transaction is an unfair practice in
and of itself.
Not only are there pending class action lawsuits
but the regulators are definitely getting in on this too.
The FDIC discussed these issues
in its spring 2022 supervisory highlights
and the CFPB has also issued various publications
on these issues.
Additionally, we're hearing
from members about their own exam experiences.
In one example, a bank had already updated
their disclosures to clarify
when NSF Representment fees would apply.
But despite this, they were advised
that the previous practices might still be found
to be in violation of (UDAP or UDAAP).
In a similar example,
a bank had also proactively changed their disclosures
to clarify these fees
but this reportedly only made the matter worse
during exam time.
Now, to be clear, these are just initial reports
from members but we highlight them
to emphasize that this is not a clear-cut issue.
As always, if you have any additional questions related
to NSF Representment risk,
feel free to contact us on the Hotline.
Until then, I'm Victoria Stephen
and this has been your Compliance Minute.
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