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#2268354 - 03/29/22 06:22 PM ODP and NSF
Baker Offline
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Joined: Nov 2005
Posts: 777
Washington State
I know that there is guidance around charging ODP fees and monitoring usage to counsel clients about alternative options. Does this only apply to ODP programs? What about when they don't have ODP and we charge NSF fees? Should NSF fees be monitored as well and is there an expectation for counseling clients?

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#2268356 - 03/29/22 06:58 PM Re: ODP and NSF Baker
rlcarey Offline
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rlcarey
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Galveston, TX
The regulatory guidance surrounds overdraft protection programs. I am not aware that would reach NSF fees, as the bank is not paying the customer into the overdraft. There is absolutely no benefit to the customer for writing checks when they have no money only for them to be return unpaid.
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#2268373 - 03/29/22 09:10 PM Re: ODP and NSF Baker
TaraSue Offline
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Joined: Oct 2013
Posts: 47
I'm only speaking to the NSF portion of your question. I was in a webinar just the other week that spent some time talking about NSF fees and what regulators are looking at. Be sure your TISA includes information around NSF fees, especially documenting how many times you can charge for the same item. Even with that, consider how many times you really feel it is reasonable to charge a fee for the same item. We're looking at clarifying our TISA and reconsidering how we charge for NSF.

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#2268466 - 03/30/22 09:34 PM Re: ODP and NSF Baker
IronP2717 Offline
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Has anyone seen formal written guidance or rules from the OCC or CFPB? I've seen public comments, but nothing formal from those 2 agencies. Unless I've overlooked it.

The Comptroller of the Currency made public comments about overdrafts, “you don’t want to be the last bank with a traditional overdraft program.” He also said banks should, make reforms including “grace periods that give customers time to cover overdrafts and avoid fees, grace amounts that allow customers to overdraft by certain amounts without a fee, and changes in posting order, i.e., the sequence in which payments are made, to limit repeat fees.”

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#2268467 - 03/30/22 09:50 PM Re: ODP and NSF Baker
rlcarey Offline
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rlcarey
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Posts: 78,958
Galveston, TX
No, but the recent request for comments on junk fees and the expanded UDAAP and fair banking efforts by the CFPB show you where this is all headed.
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#2268485 - 03/31/22 02:34 PM Re: ODP and NSF Baker
HappyGilmore Offline
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Pulling people out of the ditc...
personal opinion here - the regulatory bodies are speaking about these fees, and others, loudly and widely, hoping banks pick up on the not to subtle undertone and voluntarily make changes, which makes them look good in the eyes of regulators and lets the banks use this as a marketing tool - "look at us, we are charging you less."

after a suitable timeframe, and a number of banks being slow on the uptake, they will implement regulatory guidance that will force banks to comply with reduced or eliminated fees, likely by calendar EOY 2024.

there has been criticism for a number of banks that their account agreement does not specifically spell out every type of paid item that can result in OD or NSF, as well as how represented items can cause this too, and they have made some headlines on these banks with findings and fines.
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#2268513 - 03/31/22 05:55 PM Re: ODP and NSF Baker
Inherent_Risk Offline
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I think there has been a pretty concerted (and relatively effective) effort by the industry to defend at least some Overdraft fees from the "junk fee" label, but I have not heard much defending NSF fees. I think they are currently lumped together a lot, but I do not think they will be by the end of this. They are very different fees.

Pure speculation on my part, but, looking at the current pre-changes BoA fee schedule, which is pretty typical I think, the amount they charge to pay an item into Overdraft is the same as it is to not pay it. That doesn't make a ton of sense. I think the changes BoA are currently making in May (removing NSF fees, reducing OD), combined with the vigorous defense of overdraft fees, but not NSF fees, by the industry suggest that, while Overdraft fees will likely be part of this, NSF fees are going to be hit hard.

At any rate, if your institution relies on any of these fees, it's probably a good idea to start looking at how you might replace that income now, even if you don't want to make any changes until something formal comes along.

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#2268676 - 04/05/22 02:48 PM Re: ODP and NSF Baker
John Burnett Online
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John Burnett
Joined: Oct 2000
Posts: 39,593
Cape Cod
If there is one fee practice that is an Achille's heel for bankers, it's the charging of an OD or NSF fee each time an item hits an account in any of its potential forms, without disclosing that the same item can trigger multiple charges. Even when the item includes a check serial number in any of its variations -- the original check, a mobile deposited image of the check, a physical redeposit of the original check, an ACH RCK entry of the same check -- there are still a lot of banks that don't have the systems to detect multiple presentments.

Some argue that banks need to upgrade their systems to catch multiple presentments and suppress OD and NSF fees for second and subsequent presentments. Others say that banks need to disclose the potential for multiple presentments and consequent multiple fees.

Without legislation imposing price controls on these fees, I don't think that regulatory limits will fly. While the Bureau currently imposes inflation-adjustable caps on credit card late and penalty fees, the caps were mandated by lawmakers in the CARD Act. Congress doesn't seem to see a need to regulate deposit account fees.
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