NEW YORK–The New York State Department of Financial Services (DFS) has announced guidance it said is aimed at prohibiting unfair and deceptive overdraft and non-sufficient funds (NSF) fee practices.
It also indicated additional regulations related to NSFs may be forthcoming.
The department said the guidance is in support of its commitment to making affordable banking products and services available to underserved communities, including low- and moderate-income individuals, immigrants, and people of color.
‘Critical Component’
“Access to safe, affordable banking services is a critical component of financial health and stability,” said Superintendent of Financial Services Adrienne A. Harris. “This guidance sets clear expectations for New York banks and credit unions to prevent improper or unfair charges of overdraft and NSF fees, to encourage these institutions to address demand for low-cost banking services and to prevent harm to the most vulnerable consumers of banking services.”
The Specifics
Specifically, the DFS said the guidance informs all regulated depository institutions of the need to avoid the following practices:
- Authorize Positive, Settle Negative (“APSN”) Transactions, charging consumers an overdraft fee even though the consumer had a positive account balance sufficient to cover the transaction when it was authorized by the institution.
- Double Fees Arising from Futile Overdraft Protection Transfers, which the department said is a fee to consumers for an “overdraft protection” transfer from a consumer’s other account that is of an insufficient amount to avoid an overdraft, resulting in the consumer being charged both an overdraft fee as well as a fee for the “overdraft protection” transfer.
- Representment Fees, which involves charging a consumer more than one NSF fee for the same declined transaction, without adequate disclosures, where the merchant re-presents the same transaction to the banking institution in a second or third attempt to collect funds.
‘Extensive Evaluation’
The department said the guidance was developed after extensive evaluation and analysis of supervisory examination findings across regulated institutions and engagement with key stakeholders.
The department said it is also continuing to review overdraft and NSF fees more broadly.
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