Topic: Insufficient Funds Fees
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Are there any restrictions on exercising a right of setoff from a jointly owned deposit account where only one of the account owners owes the bank a debt? For example, if a customer is the sole owner of an overdrawn deposit account, can we exercise a right of setoff against another account the customer has at our bank that is jointly owned with their spouse, child, or anyone else?
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We recommend reviewing your account agreement for the jointly held account to determine whether it grants a right of setoff that allows your bank to use the account funds to pay the debt of any account owner. If so, we believe you can exercise a right of setoff against a joint account where only one…
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When exercising a right of setoff for an overdrawn deposit account, can we include overdraft fees in the amount recovered? Is this permissible if the only amounts we are recovering are for overdraft fees? Also, is there a statute of limitations on recovering overdrawn balances? For example, if an account with a negative balance was closed and charged off but the customer currently has funds in other accounts with our bank, can we use these funds to set off the amount that was charged off?
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Right of Setoff for Overdraft Fees We recommend reviewing the terms of your account agreement to determine whether you have a right of setoff that includes the collection of overdraft fees. In Illinois, the right of setoff can arise either contractually (when an agreement provides for a right of setoff) or under common law (when…
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We have a question regarding the lookback period for multiple re-presentment non-sufficient funds (NSF) fees referenced in the FDIC’s Supervisory Guidance on Multiple Re-Presentment NSF Fees. We updated our disclosures to include new language on multiple re-presentments and sent a notice to our customers in August 2022. We subsequently updated our fee schedule to include the fee per re-presentment. Should we use the updated disclosure date or updated fee schedule date to determine our lookback period, and how far should our lookback go?
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We do not believe that the lookback period for providing restitution for multiple re-presentment NSF fees is tied to updated disclosures or fee schedules. The FDIC’s guidance on re-presentment NSF fees addresses the lookback period for restitution and states in a footnote that “institutions with challenges readily accessing accurate ACH data that self-correct this issue…
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What is the maximum returned check fee that a nationally-chartered bank is allowed to charge commercial and consumer deposit account customers in Illinois?
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We do not believe that there is a maximum returned check fee that a national bank may charge commercial or consumer deposit account customers in Illinois. Returned Check Fees for Consumer Deposit Accounts We are not aware of a limit on returned check fees for consumer deposit accounts under Illinois law. The National Bank Act…
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Regarding the FDIC’s “Supervisory Guidance on Multiple Re-Presentment NSF Fees,” how will the FDIC determine whether our disclosures regarding multiple re-presentment non-sufficient funds (NSF) fees are adequate?
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The FDIC’s supervisory guidance regarding disclosures of NSF fees for re-presented transactions focuses on ensuring that they are clear and conspicuous. The guidance suggests that clear and conspicuous disclosures would address the amount of NSF fees and when and how the fees would be imposed, including the following information: “(1) Information on whether multiple fees may…
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Are we allowed to charge an insufficient funds fee in Illinois for consumer loan payments made by check that are dishonored? If so, what is the maximum amount we can charge?
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Illinois law allows banks to charge returned check fees for consumer loans, provided that the fee is properly disclosed and agreed to by the borrower. Additionally, we do not believe there is a maximum amount for returned check fees for loan payments, provided the fee is set according to your “prudent business judgment and safe…
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We are interested in charging a returned check fee for loan payments made by check that are dishonored. This fee would be charged on both the consumer and commercial side and would be applied only to new loans going forward. We are working on a new disclosure for this fee. However, we first want to know whether Illinois law allows this, and if so, whether there is a maximum amount that we can charge for this kind of fee.
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We believe that Illinois law allows banks to charge returned check fees for both consumer and commercial loans, provided that the fee is properly disclosed and agreed to by the borrower. Additionally, we do not believe there is a maximum amount for returned check fees for loan payments, provided the fee is set according to…
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Are the following fee caps still in place for Illinois chartered banks — the greater of $25 or actual costs for an overdraft or insufficient funds fee, and a returned check fee of up to $4.50 for commercial accounts? Are there any other fee caps we should be aware of?
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Yes, the fee caps you referenced are still in place. Regarding other fees, Illinois chartered banks generally may charge any fees agreed to by their customers, as discussed in more detail below. Section 3-806 of the Illinois Uniform Commercial Code (UCC) provides that any person who issues a check “that is not honored upon presentment…
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We can charge up to three fees when a check is dishonored: (1) a returned deposit fee, (2) a redeposit fee, charged when the customer deposits the same check a second time, and (3) a second returned deposit fee if the redeposited check is dishonored a second time. Does Illinois law limit these fees for business or consumer customers? We charge the redeposit fee for business customers whether or not the check ends up being dishonored a second time.
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With respect to your returned deposit fees, Section 3-806 of the Illinois Uniform Commercial Code (Illinois UCC) limits them to $4.50 for commercial accounts, but not for consumer accounts. Section 3-806 expressly excludes “non-commercial checking or other non-commercial accounts,” which includes consumer accounts, from this limitation. Similarly, in our view, you may charge a second…