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#2255752 - 06/22/21 07:17 PM Accidental collection of fee for a free product.
TaraTLR Offline
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I recently discovered that some of our staff has accidently been charging customers for a product that is supposed to be free for their account. My question is, how far back should we go/investigate to look for these product charges that need to be refunded to our customers? I am thinking two years, but would like others opinions as well. Thank you.

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#2255756 - 06/22/21 07:51 PM Re: Accidental collection of fee for a free product. TaraTLR
Inspector Offline
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You should look at both state and federal Unfair and deceptive practices statute of limitations to determine your look back period. You could also discuss this with your primary regulator to determine what look back they would expect, probably between 2-5 years dependent upon the pervasiveness of the issue and the difficulty in identifying impacted customers. I have seen a number of cases where the lookback was too short, resulting in criticism and a citation of a violation along with the extended look back period.
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#2255758 - 06/22/21 07:57 PM Re: Accidental collection of fee for a free product. TaraTLR
Richard Insley Offline
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Hopefully, you've stopped the bleeding and improved the training and controls to prevent this problem from recurring. The bank is in breach of its contracts (account agreements) with affected customers and there are damages. If a significant number of customers were affected by this problem, you might want to discuss your plans for remedial action with the bank's attorney.
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#2255797 - 06/23/21 04:31 PM Re: Accidental collection of fee for a free product. TaraTLR
John Burnett Offline
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The UDAP provision in the Federal Trade Commission Act doesn't have a statute of limitations, which is one reason regulators have learned to use that provision when there are unfair or deceptive acts involved. Charging consumers a fee when they qualified for a waiver has been cited in the past under UDAP.

I agree with Richard, and you may need to look back to the point at which there are no incidents where a consumer was incorrectly charged.
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#2255802 - 06/23/21 05:00 PM Re: Accidental collection of fee for a free product. TaraTLR
BrianC Online
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Illinois
I have attended several regulator panels where these types of scenarios have been discussed. In particular, the FDIC has a significant compliance focus on consumer harm. If a regulator had found this error before the bank did, they have discretion to either cite under a Reg DD violation and use the two year record retention period as the look back period or for more egregious cases impose up to a six year lookback for a UDAP violation.

The advice the regulators have consistently provided are to follow these steps:

1. Figure out the dollar amount impact, number of customers impacted, and the length of time the errors have occurred.
2. Make whatever fixes are needed to procedures, systems, training, etc. to stop the proliferation of the error.
3. Notify the board or board appointed audit committee of the scope/depth of the issue so they are aware of the risks it poses to the bank. Document communication in the board minutes.
4. Develop a restitution plan (which seems to be where are at now.
a. If we can readily define the scope of impacted customers our plan may include how many years we propose for our lookback and the dollar amounts to be reimbursed.
b. If due to system limitations in identifying the scope/depth of the issue, some banks have proposed putting together customer notification letters that can go out to the universe of potentially impacted customers (which would be all customers that held this account type that may or may not have been charged this fee). The letter provides a contact number for customers to submit claims to the bank to they believe they were charged incorrectly. The bank would then research each received claim and document its outcome.
5. Prior to implementing 4a or 4b contact your primary regulator (for example the examiner in charge) to advise them of the error you discovered, how the error happened, and the steps you have already taken to correct the error. Submit your restitution plan for approval. The regulator panel encourages step 5 because if you choose to proceed with a two year reimbursement and at your next exam your EIC says you should have gone back further, then you're stuck cutting more checks. It's better to ensure upfront that your examiner is satisfied with your plan prior to proceeding. As Richard notes, I also recommend submitting your plan to legal counsel prior to submitting it to your regulator.
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#2255942 - 06/25/21 01:58 PM Re: Accidental collection of fee for a free product. BrianC
Richard Insley Offline
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Originally Posted by BrianC
Submit your restitution plan for approval.
Unless something has changed since I was a regulator or a regulatee (is this a real word?), "approval" only comes into play when there is a formal enforcement action on the table.

Hoping that remediation of a problem never reaches MOU or C&D level, the best you can expect is the regulator's best guess about the outcome of the next examination. The question, then, would be something like: 1. we found [problem], 2. we plan to take the following action..., 3. please advise us if this action appears to fall short of the agency's enforcement policy for this type of remediation.

The answer you hope to receive is: we see no reason why our examiners would take exception with the bank's proposed solution of this matter.
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#2255943 - 06/25/21 02:02 PM Re: Accidental collection of fee for a free product. TaraTLR
BrianC Online
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Illinois
So “review” may be a better word in my response than “approval.”
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#2255952 - 06/25/21 02:20 PM Re: Accidental collection of fee for a free product. TaraTLR
Richard Insley Offline
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Toano, VA
Yeah, "review" is better. If I ask for approval or permission, the agency can simply dodge my question. I really want to know the agency's position, because it's always cheaper to do something right the first time...and I really don't want to read about the problem again in my next report of examination.
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#2256328 - 07/06/21 05:18 PM Re: Accidental collection of fee for a free product. TaraTLR
John Burnett Offline
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... or in the newspapers!
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#2256329 - 07/06/21 05:37 PM Re: Accidental collection of fee for a free product. John Burnett
Richard Insley Offline
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Good point, John. Depending on the news media's agenda, a molehill can be reported in ways that will make it sound like a mountain.
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#2256404 - 07/07/21 09:15 PM Re: Accidental collection of fee for a free product. TaraTLR
ACBbank Offline
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New York City
"Approval" is a word never heard uttered by a NYC regulator. They prefer "Non-objection" which still allows them the ability to criticize or worse, at a later date.
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#2256405 - 07/07/21 09:34 PM Re: Accidental collection of fee for a free product. ACBbank
Richard Insley Offline
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Toano, VA
Originally Posted by ACBbank
"Non-objection"
That's a perfect characterization of the stance regulators will always take. They're like referees in a game--it's their job to call fouls, not compliment the players on their performance.
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