Was hoping to get some opinions regarding the following fee situation:

We're currently charging a fee for NBFI customers, as well as a specific fee to check-cashing MSB customers. We recently had a customer that does NOT meet the check-cashing criteria ($1000 per person per day), and due to their overall volume of 15-20 checks per week, a fee was not imposed on this customer.

This wouldn't fall into customer mistreatment/unfair or deceptive if I'm viewing it correctly, based on the fact that the customer we're not charging doesn't meet the definitional criteria associated with our other fees despite the fact that they do engage in an activity (check cashing) that does appear on the list.

Am I missing something here, or are we truly ok not to charge this customer a fee based on volume & definitional criteria?

You can charge the customer a fee because his tie doesn't go with his suit if you want to. (I've seen examples where a fee would be justified. )

Charging an "MSB fee" puts the emphasis on the wrong syllable. Fees are justified because the customer's activities require extra effort from your bank, not because they meet a specific legal criteria. Most banks monitor all NBFI's, including MSBs. The fee should be for "monitoring," not for being an MSB.

Any activity that makes your customer an NBFI and requires monitoring should generate a fee. Having an ATM on premise that is not totally controlled by a third party should also generate a fee.

Thanks for the response Ken!

So we would be able to charge customers of the same category different fees as well, which is based on the fact that although they're both MSB customers, they require different levels of monitoring and thus different levels of effort necessary, correct?

What you need to do to be fair is to quantify what the fee is for, not assess it based on your customer's membership in a "class" of customers. In my opinion, you start with the idea that the fee is for monitoring then you add blocks based on the customer's activities:

* international transactions including IAT's,
* selling and reloading open system prepaid access devices,
* ACH origination,
* cashing checks,
* selling checks,
* currency exchanges,
* wire transfers.

This whole "de-risking" mess creates an expectation that banks will do a risk assessment before refusing to open an account. The secondary effect of that risk assessment should be to assemble the blocks of an appropriate fee schedule for customers that you do intend to bank. If anything provides an incentive for ongoing due diligence it would be the idea that you want to make certain that the customer's activities are as predicted because you want to make certain you have attached the right fee schedule.