The FDIC released its supervisory highlights for consumer compliance activities. As part of the 2018 examinations, the FDIC identified compliance issues with financial institution’s overdraft programs and Regulation E procedures:

Overdraft Programs- The FDIC observed potentially unfair or deceptive practices of financial institutions using an available balance method by (1) assessing more overdraft fees than appropriate based on the consumer’s actual spending; (2) not adequately describing how the available balance method works in connection with overdrafts; and (3) assessing overdraft fees on point-of-sale transactions that settle against a negative available balance even though the financial institution authorized the transaction based on sufficient funds available in the account at the time of authorization (creating the possibility that overdraft fees are imposed on transactions that did not overdraw the consumer’s account). The FDIC also examined that financial institutions did not sufficiently disclose the manner in which they assess overdraft fees for a consumer to understand when overdraft fees will be imposed.

The FDIC’s proposed mitigating factors include providing clear and conspicuous disclosures of overdraft fees in connection with the use of the available balance and ensuring that a consumer does not incur an overdraft fee if a transaction is authorized against a positive available balance.

Regulation E Procedures- The FDIC found that financial institutions (1) misapplied the 60-day timing requirement to determine a consumer’s liability for unauthorized transactions not involving an access code, resulting in the miscalculation of refunds that are due to the consumer for those unauthorized transactions; (2) did not timely investigations of a potential error upon receipt of a consumer’s oral notice, even if the financial institution requires a written confirmation within 10 days of the oral notice; (3) implemented burdensome requirements that discouraged a consumer from initiating error investigations or resolving error claims made by the consumer; and (4) failing to notify the consumer of its investigational findings or not including the required information in the written notice.

Mitigating risk factors include maintaining tracking logs of timing requirements, and adequately training new staff on Regulation E’s requirements and providing periodic refresher training for existing staff.

Link to Supervisory Highlights