Jordan Ortmeier is an attorney in Stinson LLP’s Minneapolis office and a member of the firm’s Banking & Financial Products Practice Division. She can be reached at jordan.ortmeier@stinson.com. 1 https://www.consumerfinance.gov/about-us/newsroom/ cfpb-orders-regions-bank-pay-191-million-for-illegal-surprise-overdraft-fees/ 2 See, e.g., https://www.consumerfinance.gov/about-us/blog/ banks-overdraft-nsf-fee-revenues-evolve-along-with-their-policies/ 3 https://www.fdic.gov/news/financial-institution-letters/2022/fil22040a.pdf 4 https://www.dfs.ny.gov/industry_guidance/industry_letters/ il20220712_overdraft_nsf_fees 5 https://www.occ.gov/news-issuances/federal-register/2005/70fr9127.pdf 6 https://www.fdic.gov/news/financial-institution-letters/2010/fil10081.pdf Tom Witherspoon is an attorney in Stinson LLP’s Kansas City office and is a member of the firm’s Banking & Financial Products Practice Division. He can be reached at tom.witherspoon@stinson.com. Michelle Fox, Of Counsel in Stinson LLP’s Kansas City office, is a member of the firm’s Banking & Financial Products Practice Division. She can be reached at michelle.fox@stinson.com. Third-Party Oversight Many financial institutions rely upon third parties, including core processors, for myriad transaction elements, including processing customer payments and providing systems that determine when NSF fees are assessed. Many financial institutions also rely on third parties to provide “form” deposit account disclosures. In its most recent guidance, the FDIC has reiterated the need to maintain oversight over these third-party activities. For instance, financial institutions are responsible for regulating risks to customers through these third-party transactions to the same extent as if these transactions were handled in-house. Failure to properly manage and mitigate risks to customers when using third-party services could result in regulatory issues for the financial institution. Preventative Action To avoid the growing risk of litigation and regulatory issues, at a minimum, financial institutions should conduct a thorough review of their internal and third-party NSF and overdraft programs and customer-facing disclosures to gauge compliance with the current regulatory climate. The focus of such a review should ensure sufficient disclosures, including regarding multiple fees, frequency and the maximum number of fees charged. Further, these revised disclosures must be timely provided to customers. Another compliance element is the transparency necessary for notifying customers when to expect such a fee will be charged. Financial institutions should also consider providing their customers with the opportunity to restore their accounts to a positive balance to avoid such fees. Financial institutions may need to self-identify and correct certain practices before their next examination. This may include looking back at payment- and fee-related data and deciding the best course of action. Financial institutions also should examine their policies and practices regarding such fees to see if any changes can be made. This does not appear to be a litigation and regulatory issue that will subside soon. September • October 2022 21
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