In considering a credit card product that's to be secured by a savings account, I'm looking for guidance on the application of a NSF fee and what's permissible under Reg Z. The credit card line amount will be based on the amount of funds held in the accompanying secured savings account. If a customer wants to increase their line amount, they could make a deposit to the savings account for the increase. The question is, if a deposit is returned, could a NSF be charged to the credit card line rather than the deposit account?

In reviewing 1026.52(b)1(i) and (ii) I believe this would be permissible to charge the fee to the credit card, but according to 1026.4(b)2 I believe this would be considered a finance charge. Has anyone reviewed anything like this that can confirm?

I've reviewed a lot of agreements from banks with similar products, and I've seen that very few banks charge these types of fees, making me think it's not permissible or they’re avoiding an additional finance charge noted above. My presumption about not charging the NSF fee to the deposit account is because this would essentially reduce the account balance, which should cause the available credit line to decrease as well, resulting in adverse action.

I did see some BOL threads touching on a similar subject, but not quite the details noted above. Any help is appreciated!

How would a NSF check for a deposit into the savings account be a returned payment on the credit card account?

Well, in looking at 1026.52(b)(i) and (ii) I was interpreting that a bank could consider a fee like this as a "fee based on costs" since it's associated with processing a requested increase to the line, but maybe I'm off base here.

The fee is related to a NSF deposit to the savings account. .52(b)(1) (i) & (ii) relates to penalty fees associated with the credit card account. I think it would be a far stretch to say a NSF fee tied to a savings account deposit is a credit card penalty fee.

Thank you, Dan. I appreciate your input.