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.


Senator Sherrod Brown, ranking member of the Senate Banking Committee, has sent a letter to President Obama that asks the President to prioritize funding in his FY 2017 budget proposal for programs in Title XII of the Dodd-Frank Act that are intended to assist lower income borrowers.  Title XII has not yet been implemented.

The programs authorized by Sections 1205 and 1206 of Title XII provide federal grants and other financial support to “eligible entities” to enable them to provide “low-cost, small loans to consumers that will provide alternatives to more costly small dollar loans.”  “Eligible entities” include community development financial institutions, federally-insured depository institutions, and state, local, or tribal government entities.

Community development financial institutions (CDFI) are financial institutions that provide credit and financial services to underserved markets and populations that are certified by the Treasury Department’s Community Development Financial Institutions Fund (CDFI Fund) which provides funds to CDFIs through various programs.  Section 1206 would establish limits on a CDFI’s small dollar loan program supported by the CDFI Fund, including that the loans may not exceed $2500, must be repayable in installments, and have no prepayment penalty.

Senator Brown was among a group of U.S. Senators who sent a letter to Director Cordray in June 2015 urging him “to issue the strongest possible [payday lending] rules to end the damaging effects of predatory lending.”

Title XII also authorizes a program intended to expand access of low- and moderate-income individuals to the mainstream  banking system.  Under Section 1204, the Treasury Department can provide grants and other financial  support to promote initiatives designed to enable such individuals to establish accounts in federally-insured depository institutions.

The CFPB has issued its November 2015 complaint report, the fifth in its new series of monthly complaint reports.  The new report highlights bank account or service complaints and complaints from consumers in Connecticut and the Hartford metro area.

General findings include the following:

  • As of November 1, 2015, the CFPB handled approximately 749,000 complaints nationally, including approximately 23,300 complaints in October 2015.  For October 2015, debt collection continued to be the most complained-about financial product or service, representing about 28 percent of complaints submitted.  (The CFPB stated that this was the 26th consecutive month in which it handled more complaints about debt collection than about any other type of complaint.)  Debt collection complaints, together with complaints about credit reporting and mortgages, collectively represented about 66 percent of the complaints submitted in October 2015.
  • Complaints about prepaid cards showed the greatest percentage increase, increasing about 193 percent from the same time last year (August to October 2014 compared with August to October 2015).  (In its Fall 2015 rulemaking agenda, the CFPB estimated that it expects to issue a final prepaid card rule in March 2016.)
  • Payday loan complaints showed the greatest percentage decrease, decreasing 20 percent from the same time last year (August to October 2014 compared with August to October 2015).  Complaints during those periods decreased from 589 complaints in 2014 to 469 complaints in 2015.  (Payday loan complaints also showed the greatest percentage decrease in the October 2015 complaint report.)
  • Idaho, Nebraska and Arkansas experienced the greatest complaint volume increases from the same time last year (August to October 2014 compared with August to October 2015).  The volume of complaints from Idaho, Nebraska and Arkansas increased by, respectively, 66, 41 and 42 percent.  The states with the greatest complaint volume decreases from the same time last year (August to October 2014 compared with August to October 2015) were Delaware, Alaska and Florida , with decreases of, respectively, 5, 12 and 1 percent.

Findings regarding bank account and services complaints include the following:

  • As of October 1, 2015, the CFPB handled approximately 73,300 bank account and service complaints, representing about 10 percent of total complaints.
  • Problems with account management (such as issues relating to opening and closing  accounts and dispute resolution) and problems with deposits and withdrawals (such as issues relating to restricted access to funds, fund holds, and deposit cutoff times) were the most common complaints.
  • Other issues raised in complaints included difficulty in avoiding fees, such as monthly account management fees due to low balances, debit card replacement fees, check cashing, overdraft fees, excessive withdrawal fees, dormant account fees and ATM withdrawal fees.

Findings regarding complaints from consumers in Connecticut and the Hartford metro area include the following:

  • As of October 1, 2015, approximately 8,300 complaints were submitted by Connecticut consumers, of which about 2,500 were from Hartford consumers.
  • Mortgages were the most-complained-about product, with mortgage-related complaints representing 28 percent of the complaints submitted by Connecticut consumers.
  • Debt collection and credit cards were, respectively, the second and third most-complained-about financial products by Connecticut consumers.

Today, the CFPB held a forum to learn more about how consumers are impacted by checking account screening policies and procedures. The CFPB recognizes that checking accounts are one of the most widely used financial products by consumers, but the CFPB has expressed concerns that screening practices may be preventing consumers from gaining access to basic checking accounts. During the forum, the CFPB heard presentations from consumer groups, federal and local government officials, and industry representatives on the following topics:

  • The Account Screening Information Ecosystem and Financial Institution Screening Practices
  • Consumer Experiences
  • Improving Information and Access for Consumers

According to the CFPB, many banks and credit unions rely on reports provided by specialty consumer reporting agencies (CRAs) to determine whether to open a checking account for new customers. CRAs that specialize in checking account screening commonly provide banks and credit unions with information about a consumer’s check writing and account history, including whether a consumer has had a previous account closed and whether the consumer has a record of bounced or returned checks and overdrafts. In addition to these specialty reports, banks and credit unions may also screen consumers to determine if they pose a credit risk when deciding whether to open a consumer checking account.

In prepared remarks, CFPB Director Richard Cordray stated that, “The Consumer Bureau has three areas of concern. First, we are concerned about the information accuracy of these reports. Second, we are concerned about people’s ability to access these reports and dispute any incorrect information they may find. Third, we are concerned about the ways in which these reports are being used.”

The CFPB identified the following potential next steps to improve checking account screening policies and practices:

  • Increase the accuracy of data furnished to and reported by consumer reporting agencies;
  • Identify how institutions can use various screening tools to manage risk without unnecessarily excluding potential accountholders;
  • Inform consumers about their rights to review their account histories and correct any inaccuracies; and
  • Inform consumers about how they can access different account products that meet their needs.

Director Cordray also noted that, “We are seeking, in particular, to explore ways that account screening can move beyond the use of specialized consumer reports as crude ‘black lists’ where consumers are turned down for an account simply because their name appears on the list. We envision a process that better understands consumers’ needs and can provide an account that is appropriate to their personal circumstances.”