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FDIC Issues Guidance to Financial Institutions Charging NSF Fees Following Findings of FTC Act Violations

On August 18, 2022, The Federal Deposit Insurance Corporation (“FDIC”) issued  Financial Institutions Letter 40-2022 (“Letter 40-2022”)  in an effort to eliminate certain fees that financial institutions supervised by the FDIC charge consumers. Specifically, Letter 40-2022 states that it offers supervisory guidance for financial institutions to ensure that they are aware of consumer compliance risks associated with charging “non-sufficient funds” (“NSF”) fees multiple times for the same attempted transaction, particularly when an item is presented to the bank or institution multiple times; “re-presentment.”  

In the March 2022 Consumer Compliance Supervisory Highlights, the FDIC stated that consumer compliance examinations conducted in 2021 revealed violations of Section 5 of the Federal Trade Commission (FTC) Act, which prohibits unfair or deceptive acts or practices (UDAP). The Consumer Compliance Supervisory Highlights specify that the 2021 studies show that the disclosures that some financial institutions provided their customers did not fully or clearly describe the institution’s re-presentment practice of charging NSF fees multiple times if a transaction was attempted more than once.  

Letter 40-2022 responds to these findings by  recommending financial institutions conduct a comprehensive review of their policies, practices and disclosures regarding the charging of NSF fees for re-presented transactions to avoid possible violations of Section 5 of the FTC Act. Letter 40-2022 provides recommendations by the FDIC, including the following:

  • Eliminate NSF fees; 
  • Do not charge more than one NSF fee for the same transaction;
  • Providing revised disclosures to all existing and new customers ;
  • Clearly and conspicuously disclosing the amount of NSF fees to customers and when and how such fees will be imposed, including:
    • information on whether multiple fees may be assessed in connection with a single transaction when  the same transaction is submitted multiple times for payment;
    • the frequency of NSF fees; and
    • the maximum number of NSF fees that can be assessed in connection with a single transaction.

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