The Federal Deposit Insurance Corp. is defending regulatory guidance warning banks about fees that customers can be charged when their transactions get rejected due to a lack of sufficient funds.
In a court filing this week, the FDIC asked a federal judge to dismiss a
The FDIC's motion to dismiss is the latest development in a battle between banks and their regulators over so-called nonsufficient funds fees.
The lawsuit's plaintiffs contend that the FDIC overstepped its authority by issuing the supervisory guidance, which tells FDIC-supervised banks that under certain circumstances, charging multiple NSF fees qualifies as an unfair practice.
But the FDIC is arguing that its August 2022 guidance does not create new obligations for banks.
"The supervisory guidance is exactly what it appears to be — guidance," wrote attorneys for the FDIC and Chair Martin Gruenberg. "It does not ban this practice, it does not create new obligations or independent legal consequences, and it does not serve as a basis for future enforcement actions."
The FDIC isn't the only regulator that has started to reassess its treatment of financial institutions that allegedly charge excessive NSF fees.
The Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency sanctioned Bank of America in July for charging multiple NSF fees on a single transaction. The CFPB is also in the initial stages of writing a rule that addresses NSF fees, the agency said
Further limitations on when and how banks can charge NSF fees could weigh on fee revenue at banks large and small. The banking industry's
Many of the country's largest banks voluntarily decided to
The lawsuit filed by the Minnesota Bankers Association and Lake Central Financial takes issue with the FDIC's decision to publish guidance on how banks can assess NSF fees.
As part of the guidance, the FDIC told the banks it supervises that NSF fees could be considered deceptive if they aren't adequately communicated to customers.
The bankers argued in their lawsuit that the FDIC should have used its traditional rulemaking process, which includes a notice-and-comment period, instead of issuing "arbitrary" guidance. They also asked the judge to declare the guidance invalid and in excess of the agency's authority.
The guidance "levies a binding regulatory ultimatum to more than 5,000 banks: identify and correct NSF practices and disclosures and make customer restitution … or face consequences," attorneys for the Minnesota bankers wrote in the complaint.
But the FDIC argued in its motion to dismiss the case that the supervisory guidance doesn't constitute a "final action" as defined by the Supreme Court. Because the guidance doesn't represent the end of the agency's decision-making process, the Minnesota banking group doesn't have the right to challenge it, the agency said.
The FDIC also contends that banks' concerns about potential agency enforcement actions involving NSF fees don't represent legitimate "legal consequences" for financial institutions.
The agency said that any future action against banks on the NSF fee front "would be evaluated under specific facts and circumstances."
The Minnesota Bankers Association did not immediately respond to a request for comment on the FDIC's request to dismiss the case. The FDIC declined to comment.
