40 JANUARY / FEBRUARY 2020 COMPLIANCE CONNECTION Brett J. Ashton Partner Krieg DeVault LLP bashton@kdlegal.com Krieg DeVault LLP is a Diamond Associate Member of the Indiana Bankers Association. NSF Fees What frequency limitations apply? This information is provided for general education purposes and is not intended to be legal advice. Please consult legal counsel for specific guidance as to how this information applies to your institution’s circumstances or situation. Question: Our bank assesses only one non-sufficient funds fee per transaction, regardless of how often it may be resubmitted for payment. Other banks charge multiple NSF fees on the same transaction. Does Indiana law limit the number of times an NSF fee can be charged on a single transaction? Answer: Indiana law does not contain a specific limitation on how many times a bank can charge a depositor an NSF fee for a returned transaction.1 Before making changes to your NSF fee policy, however, you should carefully review your deposit account agreement to ensure it clearly notifies customers that they may be responsible for more than one NSF fee per transaction, and consider the potential risk associated with assessing multiple NSF fees in light of recent class-action litigation filed against several Indiana credit unions based on similar practices.2 While Indiana credit unions have been the main target of class-action litigation alleging abusive NSF practices to date, the plaintiffs’ lawyers currently attacking credit unions for their NSF fee (and overdraft) practices have also filed similar lawsuits against banks in several other states. Plaintiffs in recent Indiana cases have attacked the assessment of multiple NSF fees on a single transaction based in part on a relatively ignored section of Indiana law called the Indiana Deceptive Consumer Sales Act.3 The IDCSA provides that a supplier may not commit an unfair, abusive or deceptive act, omission or practice in connection with a consumer transaction. Such an act, omission or practice by a supplier is a violation of the IDCSA whether it occurs before, during or after the transaction. An act, omission or practice prohibited by this section includes both implicit and explicit misrepresentations.4 1 There are limitations, however, on the number of permissible times a fee may be obtained for a returned entry on an electronic presentment made using the National Clearinghouse Association system. The NACHA operating rules limit a participant to no more than two such fees per entry. 2 In the past 18 months there have been class-action lawsuits filed against several Indiana credit unions based on overdraft and NSF fee practices. 3 Ind. Code § 24-5-0.5-1 to -12 4 Ind. Code § 24-5-0.5-3(a) 5 These enhanced damages require proof of a “willful deceptive act.” See Ind. Code § 24-5-0.5-4(a). 6 Perri v. Notre Dame Federal Credit Union, Cause No. 71C01-1909PL-000332 (St. Joseph Circuit Ct.). Available at: cohenandmalad.com/ wp-content/uploads/2019/09/Notre-Dame-FCU-Complaint.pdf While on the surface it would seem that the IDCSA is not intended to apply to financial institutions, Indiana courts have allowed actions to proceed under this generalized consumer protection statute in certain cases where appropriately pled. The DCSA provides for civil damages of as much as the greater of three times actual damages, or $1,000 per violation.5 The plaintiffs in these cases assert assessing multiple NSF fees on a single transaction violates the IDSCA absent clear contractual language disclosing this practice. If your bank is charging multiple NSF fees on the same transaction, you should review your deposit agreement to ensure it contains specific language indicating that you will charge an NSF fee on each occasion an item is submitted for payment, regardless of the number of times an item is submitted or resubmitted for payment, and regardless of whether you pay the item or return, reverse or decline to pay it. If you are considering changing your policy to allow for multiple NSF fees, you should review some of the complaints filed against Indiana credit unions6 on this issue to identify those practices alleged by the plaintiff’s bar to be in violation of the IDSCA. HB
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