#2022-10, April 1, 2022

FDIC Releases Supervisory Insights with Discussion on Representment Issue

Yesterday, the Federal Deposit Insurance Corporation (FDIC) issued its March 2022 edition of Consumer Compliance Supervisory Highlights.  As we anticipated, the document discusses the representment issue, including some additional detail and potential mitigation steps for banks. 

The publication provides a high-level overview in a background statement and then a summary of recent findings.  Discussion of the issue concludes with the FDIC providing various risk-mitigating activities observed at financial institutions to avoid potential violations of Section 5 of the Federal Trade Commission (FTC) Act, more commonly known as the prohibition on “unfair or deceptive acts or practices” or UDAP.  The FDIC lists “eliminating NSF fees” as the first possible risk-mitigating activity and follows-up with more reasonable and practical short-term mitigation efforts.

In addition to the recommended action steps noted by the FDIC, we encourage banks to consider the following additional risk-mitigating actions:

• Research ACH Files and memo lines for text indicating “Retry”, “Repeat Transaction”, “Second Attempt”, or similar language.  Some members have reported success in identifying represented items by reviewing memo line data from ACH files;
• Attempt to identify the universe of customers that could potentially experience a represented transaction – in other words, if your bank offers overdraft protection, the actual pool of customers whose items will not be paid even with insufficient funds is likely constrained; and
• Consider customer education for commercial clients that originate ACH files through your institution.

The Association continues to receive feedback and concerns from members on representment and we have advocated on behalf of our members for a coordinated and unified regulatory approach at the federal level.  We are also pursuing regular follow-up with our national trade partners and will address our serious concerns with the FDIC’s Supervisory Highlights content in the coming weeks.

To read the latest Supervisory Insights, click here.

House Financial Services Committee Holds Hearing on Overdraft Programs; CFPB Indicates Possible Regulatory Action

The House Financial Services Committee’s Financial Institutions Subcommittee held a hearing earlier this week to discuss bank overdraft programs.  The hearing comes in the wake of criticism of the product by Acting Comptroller of the Currency Michael Hsu and the news that several large institutions are eliminating the fees.  

During the hearing, the Democratic witnesses generally criticized overdraft plans, noting that they can impose multiple fees on consumers in some cases and that they may disproportionately affect those customers with the least amount of funds in the bank.  Republican members of the panel used the hearing to discuss the Consumer Financial Protection Bureau’s (CFPB) ongoing campaign against what the agency has termed “junk fees.”  Subcommittee Ranking Member Blaine Luetkemeyer (R-MO) noted that, “There is no legal authority for the CFPB to define the term ‘junk fee’ . . . and even less authority for the CFPB to act as a price setter in the consumer financial market.”

To read testimony from the hearing and watch an archived webcast, click here.

In related news, the CFPB indicated that the agency will “continue to explore the range of our tools” to address the issue of overdraft fees and “other financial practices that penalize products and erode trust.” The comments, which were made in a blog post on the Bureau’s website, amplify the criticism from regulators of overdraft programs in recent weeks.

To read the blog post, click here.

FDIC Issues Bank Merger RFI

Late last week, the Federal Deposit Insurance Corporation (FDIC) issued a request for information (RFI) asking for public input on bank merger transactions.  Specifically, the RFI seeks comments regarding the effectiveness of the existing framework in meeting the requirements of section 18(c) of the Federal Deposit Insurance Act, known as the Bank Merger Act.

The agency noted that with the significant changes over the past several decades in the banking industry, a review of the merger framework is warranted.  Comments are due 60 days after publication in the Federal Register.

To read more, click here.

Justice Department Issues Website Accessibility Guidance

Late last week, the Department of Justice issued guidance that provides additional clarity about website accessibility and how businesses and others can ensure compliance with the Americans with Disabilities Act (ADA).  The new guidance provides examples of website accessibility barriers, clarifies when the ADA requires web content to be accessible and offers suggestions for improving website accessibility. It also includes links to additional accessibility resources and existing technical standards.

The guidance comes after a letter sent by 181 disability organizations last month requested the DOJ promulgate enforceable online accessibility standards by the end of the current administration.

To read more, click here.