The FDIC is defending its regulatory guidance regarding bank non-sufficient fund fee policies in the face of a lawsuit.
In a Sept. 19 filing, the FDIC called for the dismissal of a lawsuit filed in July by Minnesota Bankers Association and Annandale, Minn.-based Lake Central Bank. The agency called it “a transparent effort to avoid the possibility of future enforcement actions related to charging multiple NSF fees, regardless of the risks posed by those practices.” Even if the plaintiffs prevail, their “legal obligations under the Federal Trade Commission Act and Dodd-Frank Act will remain in force,” the FDIC said.
According to August 2022 guidance, banks violate the Unfair Deceptive Acts and Practices prohibition of the FTC Act by not clearly describing their re-presentment policies before charging multiple NSF fees for the same transaction. The FDIC recommended banks retroactively evaluate their NSF practices for risks stemming from charging multiple NSF fees. If issues were found, banks were expected to take corrective action, including providing restitution, the agency said.
The MBA lawsuit alleges that the FDIC lacks the authority to change existing bank disclosure requirements and issue a UDAP rule on NSF fees. It also accuses the FDIC of violating the Administrative Procedure Act by bypassing input from regulated financial institutions and the public before it issued the rule. In June, the FDIC clarified banks would not need to conduct the look-back unless there was the “likelihood of substantial consumer harm,” a clarification which the MBA and Lake Central Bank said lacked specificity.
According to the FDIC, the lawsuit lacks “constitutional standing” and is unreviewable under the Administrative Procedure Act because it doesn’t have binding language and did not constitute a final enforcement action. To the agency, the guidance “is intended to provide exactly that — guidance — to assist financial institutions in avoiding potential enforcement.
“It does not ban this practice, it does not create new obligations or independent legal consequences, and it does not serve as a basis for future enforcement actions,” the FDIC stated.