The CFPB and four other agencies have issued “Interagency Guidance Regarding Deposit Reconciliation Practices.” The other agencies are the OCC, Fed, FDIC, and NCUA. The guidance is intended to set forth the agencies’ supervisory expectations regarding consumer account deposit reconciliation practices.
For purposes of the guidance, a “credit discrepancy” is created when the amount that a bank credits to a customer’s account differ from the total of the items deposited. The guidance refers to a discrepancy that results in a customer being credited with less than the full amount deposited as “a detriment to the customer” that “benefits the financial institution, if not appropriately reconciled.” The guidance indicates that “[t]echnological and other processes exist that allow financial institutions to fully reconcile discrepancies in deposit accounts.” (The agencies acknowledge, however, that there are limited circumstances in which items cannot be reconciled, such as when an item is damaged to the point that its true amount cannot be determined.) The guidance notes that the agencies have observed that “[i]n some instances, financial institutions do not research or correct [all discrepancies], resulting in the customer not receiving the full amount of the actual deposit.”
The guidance discusses applicable laws, such as the funds availability requirements of the Expedited Funds Availability Act and Regulation CC, and notes that a financial institution’s policies or practices that do not appropriately reconcile credit discrepancies within the prescribed time frames could raise Regulation CC concerns if a customer is left without timely access to the correct amount of funds due to a discrepancy. It also notes that a financial institution’s deposit reconciliation practices, depending on the facts and circumstances, can result in unfair or deceptive practices that violate Section 5 of the FTC Act or Sections 1031 and 1036 of the Dodd-Frank Act.
The agencies state that they expect financial institutions “to adopt deposit reconciliation policies and practices that are designed to avoid or reconcile discrepancies, or designed to resolve discrepancies such that customers are not disadvantaged.” They further state that financial institutions are expected to “effectively manage their deposit reconciliation practices to comply with Regulation CC and other applicable laws or regulations and to prevent potential harm to their customers.” Financial institutions are also expected to provide accurate information to customers about their deposit reconciliation practices and implement “effective compliance management systems that include appropriate policies, procedures, internal controls, training, and oversight and review processes to ensure compliance with applicable laws and regulations, and fair treatment of customers.”
At a minimum, the guidance appears to mean that a bank should not have policies or practices under which the amount encoded on the deposit slip is automatically accepted as correct in all circumstances or when such amount does not vary from the amount of the items deposited by more than a specified amount. Such policies or practices would necessarily create the potential for the customer to receive a credit for less than the amount actually deposited.
Instead, it appears a bank should have policies and practices that (1) pending further investigation, automatically give the customer the benefit of the greater amount when the amount encoded on the deposit slip varies from the items deposited (either regardless of the amount of the discrepancy or when the discrepancy is not more than a specified amount), or (2) immediately investigate and reconcile all discrepancies (or any discrepancies for which the customer is not automatically given the benefit of the greater amount).
On June 21, 2016, from 12 p.m. to 1 p.m. ET, Ballard Spahr attorneys will hold a webinar on the guidance: Interagency Deposit Reconciliation Guidance: Will Your Bank’s Practices Meet Expectations? The webinar registration form is available here.