COMPLIANCE RISK – READING BUT NOT ACTING

In late 2017 the FDIC’s Dallas Region Quarterly Newsletter contained an article entitled Automated Overdraft Program and One-Time Debit and ATM Opt-In Procedure Considerations. The article described a situation observed in several examinations regarding overdraft programs and the interplay with Regulation E opt-in requirements.

The well-written article concluded with the following admonition, “If you self-identify violations or potential issues described in this article, management should immediately modify procedures to prevent consumer harm, identify any customers harmed by the practices, and address any harm resulting from the practices, such as by providing any appropriate restitution.” Good solid advice. We would have encouraged any bank to do the same.

How many banks got the Newsletter and did not read the article? How many banks got the Newsletter, read the article, but did not conduct a review to see if the problem existed in their operations?

We are aware of more than one bank that received the newsletter (confirmed by the examiner), but either did not read the article or read the article but did not take action in response to the article. During 2018 examinations FDIC examiners conducted reviews for the issue that was the subject of the article, found problems, and cited violations.

There is no argument; the violations were legitimate. While there is no requirement that says you must jump into action and conduct a review as soon as you read an article; maybe you should. Lessons learned:

  • Read what the agencies send you; and
  • Respond to what you read.

A copy of the Automated Overdraft Program and One-Time Debit and ATM Opt-In Procedure Considerations article is available here. Open and read at your own risk. Be prepared to take action.

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