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    Supervisory Guidance on Multiple Re-Presentment NSF Fees

    On August 18, 2022, in FIL-40-2021 the FDIC issued guidance to FDIC-supervised institutions to address certain consumer compliance risks associated with assessing multiple non-sufficient funds (NSF) fees arising from the re-presentment of the same unpaid transaction. 

    Many financial institutions charge NSF fees when checks or Automated Clearinghouse (ACH) transactions are presented for payment, but cannot be covered by the balance in a customer’s transaction account.  After being declined, merchants may subsequently resubmit the transaction for payment. 

    Some financial institutions charge additional NSF fees for the same transaction when a merchant re-presents a check or ACH transaction on more than one occasion after the initial unpaid transaction was declined.  In these situations, there is an elevated risk of violations of law and harm to consumers. 

    The FDIC has identified violations of law when financial institutions charged multiple NSF fees for the re-presentment of unpaid transactions because disclosures did not fully or clearly describe the financial institution’s re-presentment practice, including not explaining that the same unpaid transaction might result in multiple NSF fees if an item was presented more than once.  This information must be clearly and conspicuously disclosed to customers.

    Practices involving the charging of multiple NSF fees arising from the same unpaid transaction results in heightened risks of violations of Section 5 of the Federal Trade Commission (FTC) Act, which prohibits unfair or deceptive acts or practices (UDAP).  Third parties, including core processors, may be involved in processing payments, identifying and tracking re-presented items, and providing systems that determine when NSF fees are assessed.  Such third-party arrangements also present risks if not properly managed. Failure to adequately disclose re-presentment NSF fee practices in account disclosures creates risk to include class action lawsuits including breach of contract.

    Financial institutions should review their practices and disclosures regarding the charging of NSF fees for re-presented transactions. 

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