Reg DD only seems to address mandates for the initial disclosures for terms and conditions (fees). Is it required that a depositor receive a written notice of an NSF or, in the case of overdraft protection, that the interest has started accruing when an NSF check is paid ? My bank would like to stop mailing notices for each occurrence and save perhaps $4,000 per month. Our contract with the depositor doesn't address correspondence. Thanks for any thoughts provided !

I can't address any required correspondence on the line of credit issue, but we've had discussions in the past about NSF notices. They are a customer service issue, not a federal requirement. Check any state requirements which may apply, however.

There is no federal requirement that you send NSF notice, even if the account is backed up by a line of credit. (The line itself has requirements for periodic statements, but not one for individual draws.)

Prior discussions here on NSF notices have regarded them as a standard courtesy. The bank's business incentive to send them is they often represent an early notice to the customer that the account has been compromised; e.g. forgeries paid. Your bank's liability would be enhanced if you paid a couple of fraudulent checks, then began to bounce the good checks as NSF. You and the customer are both better off if you get as much notice of the problem as possible.

Suspending the notices is your basic risk vs. reward calculation.

We discontinued sending notices several years ago and have not had any problems from a customer service standpoint. That being said, if the customer has an overdraft line of credit we do send notices on advances from the LOC.

The opinions stated are mine and not those of my employer.

Interesting distinction. A fraudster could dig a lot deeper hole using the line of credit that backs up my account than he could relying only on the funds in the account!

Good point. We've had that discussion in the past, but the LOC's are small enough that losses have been manageable. That coupled w/the interest rate and fees on the LOC generally keep us in the black and customers on their toes.

That is what our retail people are saying as well. The limit on the overdraft line is just $300. So that is theoretically the limit we are willing to accept as our risk in the case of fraud.