N.Y. Department of Financial Services Announces New Guidance on Overdraft and NSF Fees
The New York State Department of Financial Services (NYDFS) recently issued new guidance prohibiting unfair and deceptive overdraft and nonsufficient funds (NSF) fees.
“Access to safe, affordable banking services is a critical component of financial health and stability,” said NYDFS Superintendent Adrienne A. Harris. “This Guidance sets clear expectations for New York banks and credit unions to prevent improper or unfair charges of overdraft and NSF fees, to encourage these institutions to address demand for low-cost banking services and to prevent harm to the most vulnerable consumers of banking services.”
The guidance focuses on three fee policies that regulators hope to end, according to American Banker. It addresses overdraft charges when the consumer has sufficient funds in their account at the time of purchase, “overdraft protection” fees that transfer funds from another account without covering the transaction, and double charging accounts after multiple failed attempts to collect payment.
The guidance follows increased scrutiny of the state’s lenders’ practices. A law went into effect in January requiring state-chartered banks to pay consumer checks in the order received, or from the smallest to largest dollar amount for that business day. A group of congressional Democrats are also hopeful that an overdraft bill will be taken up in the House by the end of the month.
However, the New York Bankers Association noted that some of the requirements in the new guidance may not be practical. President of the association Clare Cusack said that it “has the potential to unduly disadvantage New York’s state-chartered banks since the additional disclosure and other requirements may not be consistent with those applicable to federally chartered banks.”
She also stated that the association supports the Bank On program, which provides certified accounts without overdraft fees to bring underserved consumers into the banking system.