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When a business customer with multiple deposit accounts overdraws account #1, we charge an insufficient funds fee and place a hold for the amount of the overdraft on account #2. If the customer then overdraws account #2, we charge an unavailable funds fee. Our business account agreement permits us to place the hold and charge the fees. However, are you aware of any guidance as to whether this practice is deceptive? – IBA Compliance Connection

When a business customer with multiple deposit accounts overdraws account #1, we charge an insufficient funds fee and place a hold for the amount of the overdraft on account #2. If the customer then overdraws account #2, we charge an unavailable funds fee. Our business account agreement permits us to place the hold and charge the fees. However, are you aware of any guidance as to whether this practice is deceptive?

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No, we are not aware of any guidance on this practice, particularly because it applies only to your business customers. The Dodd-Frank Act’s prohibition of unfair, deceptive and abusive acts or practices (UDAAP) applies only to consumers, not to business customers, and consequently the UDAAP risks are low. Provided that your fees and practices match what is disclosed in your account agreements, it is unlikely that this will be found to be a deceptive practice. Just be sure that the account is clearly designated as a business account.

For resources related to our guidance, please see:

  • Consumer Financial Protection Act of 2010, 12 USC 5536(a) (“It shall be unlawful for (1) any covered person or service provider . . . (B) to engage in any unfair, deceptive, or abusive act or practice.”)
  • Consumer Financial Protection Act of 2010, 12 USC 5481(6) (“Covered person” means “any person that engages in offering or providing a consumer financial product or service . . . .”)