The Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau (“CFPB”), the Federal Deposit Insurance Corporation (“FDIC”), the National Credit Union Administration, and the Office of the Comptroller of the Currency (“OCC”) issued guidance on May 18, 2016 outlining the agencies’ supervisory expectations regarding customer account deposit reconciliation practices. The guidance does not impose any new requirements, but reminds institutions of the expectation that they implement policies and procedures to protect customers where there is a credit discrepancy (e.g., difference between the amount of the actual deposit and the amount credited to the customer’s account).
The guidance indicates that a “credit discrepancy” may occur where a customer deposits a certain amount into an account (e.g., $110), but lists a different amount on the deposit slip (e.g., $100), thereby resulting in too little credit for the deposit. The guidance reminds institutions to research and correct these discrepancies in compliance with the Expedited Funds Availability Act, as implemented by Regulation CC, and the prohibition on unfair, deceptive, or abusive acts or practices (“UDAAP”). The guidance acknowledges that irreconcilable discrepancies may occur where a deposit item is damaged to the point that the actual amount cannot be determined. However, the agencies expect institutions to adopt deposit reconciliation policies and procedures in order to prevent customer harm and ensure that customers receive accurate information about the institution’s practices.
Recent Enforcement Actions
The CFPB, FDIC, and OCC took action against two related banks and their parent bank holding company in August 2015 for allegedly unfair and deceptive credit discrepancy reconciliation practices. The agencies asserted that the banks failed to investigate and correct credit discrepancies that fell below certain thresholds, in violation of the prohibition on UDAAP. The banks allegedly credited the amount listed on the consumer’s deposit slip, rather than the actual amount of money deposited into the consumer’s account. The agencies further alleged that the banks’ practice of implying that all consumer deposits were verified and corrected was a deceptive act or practice. The banks were assessed civil money penalties of $3 million by the FDIC and $10 million by the OCC, and the banks and their bank holding company (acting as a service provider) were assessed civil money penalties of $7.5 million by the CFPB. The parties were also required to pay redress to affected consumers, including any associated fees due to the discrepancy (e.g., overdraft, insufficient funds, and monthly maintenance fees) and interest.
Institutions should ensure that they have implemented appropriate policies, procedures, and controls to help ensure that deposit discrepancies are avoided or reconciled. Institutions should also consider reviewing consumer complaints to determine whether their systems are working appropriately and performing periodic audits on deposits to ensure the accuracy of credits. Institutions should also review consumer-facing materials to ensure that consumers are accurately informed of the institution’s practices for identifying and reconciling deposit discrepancies.