The FDIC issued Supervisory Guidance (FIL-19-2023) to ensure that 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). The guidance expands on an FDIC 2019 Supervisory Highlights article titled “Overdraft Programs:  Debit Card Holds and Transaction Processing” by discussing the FDIC’s concerns with both the available and ledger balance methods used by institutions when assessing overdraft fees.

Assessing overdraft-related fees on APSN transactions increases the risk of violations of Section 1036(a)(1)(B) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and Section 5 of the Federal Trade Commission (FTC) Act.

Unanticipated and unavoidable overdraft fees can cause substantial injury to consumers. Due to the complicated nature of overdraft processing systems and payment system complexities outside the consumer’s control, consumers may be unable to avoid injury. The FDIC encourages institutions to review their practices regarding the charging of overdraft fees on APSN transactions to ensure customers are not charged overdraft fees for transactions consumers may not anticipate or avoid.

The FDIC has released related institution letters in the past:

• Overdraft Payment Programs and Consumer Protection Final Overdraft Payment Supervisory Guidance (FIL-81-2010)
• Supervisory Guidance on Multiple Re-Presentment NSF Fees (FIL-40-2022)

If you are concerned about how your institution’s overdraft program adds up, contact us for help.

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