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UDAAP: DC Positive Balance/Insufficient Funds

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As it relates to ODP programs, have there been any recent updates or proposals related to debit card authorizations approved on a positive balance, but which are then presented against insufficient funds because customer has used the funds and the bank is not allowed to assess OD/NSF fees on the debit card item? (This assumes the customer has opted-in for Reg E inclusion of debit card transactions.) I've heard this may be considered a UDAAP problem but haven't found any publications on the subject.

The FDIC has taken the position that institutions that have ad hoc programs should not be obtaining opt-ins as there is nothing for the customer to opt into but an overdraft fee. There is no formal overdraft service for the customer to access. The FDIC considers this to be UDAAP since the customer opted into a program that does not exist. Consequently, the A-9 form would not accurately describe your overdraft practices.

The FDIC has not formally published any guidance substantiating its position, but conversations with more than one of my clients indicate that field examiners are continuing to cite this and are requiring look backs and reimbursements.

First published on 11/26/2017

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