Banks warned not to charge repeat NSF fees on same transaction

FDIC NSF fees overview:

• Who: The Federal Deposit Insurance Corporation (FDIC) issued a warning and subsequent guidance to FDIC-registered banks regarding non-sufficient funds (NSF) fees.
• Why: The FDIC found that banks often charge customers multiple NSF fees on a single transaction. 
• Where: The FDIC warning applies to banks in the United States that the agency supervises. 

The Federal Deposit Insurance Corporation (FDIC) is prepared to “take appropriate action to address consumer harm and violations of law” regarding banks’ practice of charging consumers repetitive non-sufficient funds (NSF) fees on a single transaction.

A bank charges NSF fees when a customer attempts to make a transaction, either with a check or a debit card, without enough money in their account. This typically results in a bounced check or a declined transaction. In some instances, the merchant will resubmit the transaction after they see it hasn’t gone through. The FDIC found that banks often charge the NSF fee again whenever a transaction is resubmitted. 

This fee pile-on violates consumer compliance laws, especially when institutions don’t “fully or clearly describe the institution’s re-presentment practice” in their disclosures. The agency’s guidance notes that some banks have already faced class action lawsuits related to NSF fees and disclosures, some resulting in “substantial settlements.”

Among its recommended remedies, the FDIC suggests banks eliminate NSF fees altogether or stop charging more than one NSF fee for the same transaction.

NSF fees ‘unfair,’ ‘deceptive,’ FDIC says

Specifically, charging multiple NSF fees risks violating the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices.

This practice can be unfair to consumers because it can “result in substantial injuries to customers; the injury may not be reasonably avoidable; and there may be no countervailing benefits to either customers or competition,” according to the FDIC. 

NSF fees can also be deceptive by misleading customers regarding the bank’s true practice of charging such fees if the disclosures do not adequately detail the fee structure. 

FDIC threatens ‘enforcement actions’ over NSF fees

The FDIC’s main recommendations to banks is to eliminate NSF fees or not charge them on the same transaction. Additionally, banks are encouraged to review their policies around resubmitted transactions and make appropriate changes, including customer notifications related to NSF transactions and providing revised disclosures to all customers that “clearly and conspicuously” disclose the amount of NSF fees and when and how they will be imposed. 

The FDIC encourages banks that have self-identified NSF fee issues to “take full corrective action, including providing restitution to harmed customers” and “monitor ongoing activities and customer feedback to ensure” lasting improvement. 

The FDIC notes that it will recognize and “generally not cite [violations]” when a bank makes “proactive efforts to self-identify and correct violations.” If not, the FDIC will “evaluate appropriate supervisory or enforcement actions, including civil money penalties and restitution.”

You may qualify to join an NSF fee class action lawsuit investigation if you received unfair charges.

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