McGlinchey Stafford, PLLC
MONTH-IN-BRIEF (May 2023)
Banking Law
OCC and FDIC Issue Guidance on Overdraft Fees
By Rachael L. Aspery, McGlinchey Stafford, PLLC
On April 26, 2023, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), (collectively “Agencies”) each individually released supervisory guidance to ensure that each respective Agencies’ supervised institutions are aware of the consumer compliance risks associated with assessing overdraft fees on a transaction that was authorized against a positive balance but settled against a negative balance (APSN). Both sets of guidance expand on previously issued guidance by each respective agency.
Generally, financial institutions process transactions by a ledger balance method or available balance method for the purpose of assessing overdraft-related fees. Available balances may be impacted by pending debit or credit transactions. Financial institutions vary when assessing overdraft fees on debit card transactions that authorize when a customer’s available balance is positive but later post to a customer’s account when their balance is negative. Even though the customer’s balance was sufficient to cover the transaction when the customer initiated the debit card transaction, a customer can be assessed an overdraft fee when the transaction settles because of one or more intervening transactions. In addition to assessing an overdraft fee on the APSN transaction, some banks also assess overdraft fees on intervening transactions that exceed the customer’s account balance. Further, some institutions also charge representment fees when a bank receives a check or ACH transaction that is presented for payment from a customer’s deposit account and the account does not have sufficient funds to pay the check or transaction.