OBL Files Amicus in FDIC UDAAP Suit

07/31/24

In August 2022, the FDIC issued Financial Institutions Letter 40-2022 (FIL 40), which provides Supervisory Guidance on Multiple Re-Presentment NSF Fees. Despite being classified as "Supervisory Guidance," FIL 40 we argue is legislative rule that was promulgated without following necessary administrative procedures and exceeds the FDIC's statutory authority.

FIL 40 requires over 5,000 financial institutions under FDIC supervision to retroactively evaluate their practices related to charging multiple NSF fees on the same unpaid transaction. If issues are found, institutions are expected to take corrective actions, including providing revised disclosures and restitution to harmed customers. FIL 40 also encourages eliminating NSF fees and adopting new disclosure and notification requirements that surpass existing federal regulations.

For banks that fail to self-identify and correct these practices, FIL 40 threatens enforcement actions under the FTC Act, including civil monetary penalties and restitution orders. In June 2023, the FDIC issued FIL 32 to clarify aspects of FIL 40, stating that a lookback review is not required unless there is substantial consumer harm, but this does not change the requirement for full corrective action and restitution.

Case Update: Almost exactly one year ago the Minnesota Bankers Association and Lake Central Bank filed suit against the Federal Deposit Insurance Corporation for issuing supervisory guidance to banks on NSF fees without engaging in the formal notice-and-comment rulemaking process hoping to vacate FIL 40. In April of this year the judge in the case issued his opinion granting the FDIC's motion to dismiss the suit. The Minnesota Bankers Association is appealing that ruling and the OBL along with bankers associations around the country are filing an amicus brief supporting the appeal.