On November 24, 2010, the FDIC issued final guidance for banks regarding overdraft fees. The concern prompting the guidance was spurred by automated overdraft programs which many banks have in place. The final guidance stated: “The FDIC is particularly concerned about the risks posed by automated overdraft payment programs, which are established programs, often partially or fully computerized, that are used by institutions to determine whether non-sufficient fund (NSF) transactions qualify for overdraft coverage based on pre-determined criteria.”
As such, the FDIC noted that it expects supervised institutions to take certain actions regarding automated overdraft programs. These actions can be found at this site: http://www.fdic.gov/news/news/financial/2010/fil10081b.pdf. These actions include annual overview, marketing review, training, disclosures, monitoring programs, daily limits on customer costs, considering eliminating fees for small overdrafts, customer alerts, providing information on financial workshops, review of check clearing procedures, monitoring and mitigating other risks. This list should not be considered exhaustive and banks should refer to the FDIC’s actual language. The FDIC further noted: “Legal and compliance risks associated with overdraft payment programs include: Section 5 of the Federal Trade Commission Act, the Equal Credit Opportunity Act, the Truth in Savings Act, the Electronic Fund Transfer Act, as well as related implementing regulations and any changes to those regulations or statutes.”
The FDIC expects any additional efforts to mitigate risks to be in place by July 1, 2011. The FDIC press release can be viewed here: http://www.fdic.gov/news/news/press/2010/pr10257.html.