OVERDRAFTS In recent months, regulators have issued multiple documents in the form of supervisory guidance and observations, raising concerns for community banks. Notably, the October 2023 Supervisory Highlights from the Consumer Financial Protection Bureau (CFPB) addressed “unlawful junk fees” discovered in their supervision of financial institutions that are $10B and above. The areas of attention in deposit accounts include Multiple Fees on Re-Presented Items and Authorize Positive, Settle Negative (APSN), among other things. Addressing Multiple-Representments Multiple fees on re-presented items can occur when NSF items are re-presented after being returned to the originating financial institution. The CFPB recognized core processing systems are responsible for the assessment of fees on re-presented items. The Supervisory Highlights state, “Examiners concluded that, in the offering and providing of core service platforms, core processors engaged in an unfair act or practice by contributing to the assessment of unfair NSF fees on re-presented items.” It is unclear whether the CFPB will mandate that core processing systems implement technology to avoid assessing re-presentment NSF fees. However, they did comment that proper coding by originating financial institutions, in concert with core processing system solutions, will avoid the assessment of fees on re-presented items. It was also reported that “financial institutions engaged in unfair acts or practices by charging consumers re‑presentment NSF fees without affording the consumer a meaningful opportunity to prevent another fee after the first failed representment attempt.” As indicated in the Supervisory Highlights, the CFPB recognizes that only checks and (some) ACH items can be identified as re-presented items and recommends remediation of consumers for those identifiable re‑presentment NSF fees. Tackling Authorize Positive, Settle Negative (APSN) Concerns APSN occurs when overdraft fees for debit card or ATM transactions are assessed where the consumer had a sufficient available balance at the time the consumer authorized the transaction, but the account balance becomes insufficient at the time of settlement due to the delay between authorization and settlement. Regulators have expressed concerns about the potential for APSN practices to lead to unanticipated overdraft fees for consumers. To address the issue, financial institutions should consider technology solutions from their core processor NAVIGATING THE EVOLVING REGULATORY LANDSCAPE By Cheryl Lawson, EVP — Compliance Review, ADVANTAGE, powered by JMFA 17 The CommunityBanker
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