ICBA meets with OCC on re-presentment concerns

ICBA leadership community bankers and staff this week met with OCC officials on the agency’s supervisory approach to how banks treat single 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 OCC Senior Deputy Comptroller for Bank Supervision Policy Grovetta Gardineer and other agency officials, ICBA expressed concerns with the agency’s April 2023 guidance on re-presentment fee practices.

OCC Guidance: The agency’s guidance says disclosures may be deceptive under Section 5 of the Federal Trade Commission Act if they do not clearly explain that multiple or additional fees may result from multiple presentments of the same transaction, while bank practices may also be unfair under the act if consumers cannot reasonably avoid harm. The guidance encourages banks to review their practices to ensure compliance and take corrective action as appropriate.

Key Challenges: ICBA At-Large Director Jill Sung of Abacus Federal Savings Bank in New York, N.Y., and ICBA Past Chairman Robert Fisher of Tioga State Bank in Spencer, N.Y., co-facilitated the discussion and focused on the lack of readiness of core service providers, the structural and operational obstacles associated with accurately identifying and stopping fees from being assessed, and the abruptness of the policy change on a practice that has existed for years.

ICBA Recommendations: ICBA Vice Chairman Jack Hopkins of CorTrust Bank in Mitchell, S.D., said community banks understand the OCC’s position applies to future re-presented items. During the meeting—which also included members of ICBA’s Consumer Financial Services Subcommittee—he encouraged the OCC to:

  • Refrain from issuing corrective actions or any other regulatory findings for at least one year.

  • Allow community banks reasonable time to update their disclosures and practices in compliance with the OCC’s guidance.

  • Provide supervised institutions with the specific language the agency deems is missing from disclosures.

  • Allow notice mechanisms that banks use to keep customers aware of their account status to automatically eliminate the threat of a UDAP violation.

FDIC Guidance Update: The FDIC in June updated its supervisory guidance on multiple re-presentment nonsufficient funds 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 OCC examiners are requiring them to conduct lookbacks on re-presentments during the agency’s examinations.