On April 26, 2023, the OCC issued a bulletin to banks to address the risks associated with overdraft protection programs. According to the OCC, overdraft protection programs can present a variety of risks, including compliance, operational, reputation, and credit risks. The bulletin discusses certain practices that may present heightened risk of violating prohibitions against unfair or deceptive acts or practices.
Consistent with the OCC’s mission to promote fair access to financial services, the bulletin describes practices that may assist banks with managing overdraft protection program risks. When supported by appropriate risk management practices, overdraft protection programs may assist some consumers in meeting short-term liquidity and cash-flow needs. The bulletin contains the following:
Background information on overdraft protection programs;
Practices that may present heightened risk, such as:
assessing overdraft fees on debit card transactions that are “authorize positive, settle negative” (APSN); and
assessing an additional fee each time a third party resubmits the same transaction for payment after a bank returns the transaction for non-sufficient funds (NSF).
Practices that may help to manage risks associated with overdraft protection programs, including
assisting consumers in avoiding unduly high costs in relation to the face value of the item being presented, the amount of their regular deposits, and their average account balances; and
implementing fees and practices that bear a reasonable relationship to the risks and costs of providing overdraft protection program services.
The OCC’s full bulletin can be found here.