ICBA leadership community bankers and staff met with Federal Reserve officials on banking regulators’ supervisory approach to how banks assess fees on items that are repeatedly rejected for insufficient funds.

Background: Some financial institutions charge disclosed non-sufficient-funds fees for the same transaction when a merchant re-presents an ACH payment or check more than once after the transaction has been declined.

Agency Meeting: In the meeting with Fed Governor Michelle Bowman and staff, ICBA expressed concerns with an article in the agency’s September Consumer Compliance Outlook, in which the Fed joined the FDIC and OCC in targeting re-presentment fees. The meeting followed previous ICBA meetings with FDIC and OCC officials.

Fed Guidance: In the article, the Fed said examiners have cited re-presentment fees as an unfair practice in violation of Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices. The article recommends refraining from charging re-presentment fees, informing examiners of third-party practices, and informing consumers to mitigate UDAP risk.

Key Concerns: During the Fed meeting, Robbie Barnes of PriorityOne Bank in Magee, Miss., and Mike Burke of ChoiceOne Bank in Lapeer, Mich., discussed concerns with the sudden and punitive policy shift on re-presentments and the lack of readiness of core providers. Noah Wilcox of Grand Rapids State Bank and Minnesota Lakes Bank said the policy will ultimately restrict access to banking services for consumers.

ICBA Recommendations: Noting that agency guidance contradicts regulations allowing re-presentments if fully disclosed, Brenda Foster of First Western Bank and Trust in Minot, N.D., asked the Fed to allow community banks sufficient time to update their practices and systems to provide the best chance of adhering to agency guidance.

Fed Response: During the meeting, the Fed officials acknowledged the policy shift is a change to long-standing practice, which is why the agency is not requiring lookbacks, and that banks need time to update practices and work through core system obstacles. They said field examiners should not be citing banks for rules changes without notice and that the Fed is working to communicate its expectations to examiners.

FDIC Guidance Update: The FDIC in June updated its supervisory guidance on multiple re-presentment fees to clarify that it will not ask institutions to conduct a lookback review absent a likelihood of substantial consumer harm. ICBA leadership community bankers and staff called on the FDIC to rescind lookback requirements during a meeting with agency officials earlier this year.

ICBA Guide: With community banks reporting that the agencies are imposing violations even on banks that are compliant with fee disclosure requirements, ICBA last year released a member-protected fact sheet on the issue with recommendations for reducing the risk of penalties.

ICBA Contact: ICBA encourages community bankers to email Senior Vice President and Regulatory Counsel Rhonda Thomas-Whitley if examiners are requiring them to conduct lookbacks on re-presentments during the agency’s examinations.