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#11304 - 12/05/00 01:45 PM Fines on MMDAs
Bear Collector, CRCM Offline
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Bear Collector, CRCM
Joined: Nov 2000
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District of Columbia
In the recent edition of Compliance Action, there was a Q&A regarding fines on MMDA accounts. Our bank recently raised the fine from $5 per excess transaction to $25 per excess transaction to discourage this type of activity. However, now that our fines are so much stiffer than before, I have noticed that many of our branches are refunding the fines charged to customers who complain about those charges. I beleive strongly in good customer service, but my feeling is that these are not "bank fees" in the traditional sense, they are fines for "breaking the law" and should not be refunded unless it was a bank error. Is there any regulatory guidance on this? Any thoughts? How do other banks handle the refund of these fines?
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#11305 - 12/05/00 03:42 PM Re: Fines on MMDAs
Andy_Z Offline
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Talk about stiff! I can understand why they are being refunded. The branch manager doesn't want to lose a good customer because one check wasn't cashed right away and four came in in one month when only three were written, as an example.

The amount of the "fine" is up to you. But it isn't a fine as in a speeding ticket. It is a fee you and the customer agreed to.

You impose a penalty to disuade customers from writing excessive checks in MMDA accounts. You may justify this fee based on your systemic procedures. Often banks review MMDA activity on an ex post basis. We do and it is a manual operation, or recount if you are in Florida. (Sorry, couldn't resist.) We have to review the items to see when they were written, if they were hold-overs and if they were to third parties. If your system can stop checks from being processed, you don't need this.

Regardless of the fee amount (emphasis added), three occurances in a rolling 12-month period should spur action to re-classify the account. If the refund hides this, I'd look closely at it. But I believe the focus here should be on compliance more than the fee. You determine the fee amount, you collect it and you keep it. It isn't as thought it is sent directly to the government. It is charged the same as an NSF or any other fee you impose.

Hope this helps.

Andy Zavoina
Opinions stated are not necessarily that of my employer.

My opinions are not necessarily my employers.
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