Agencies issue guidance relating to deposit reconciliation
AML AND COMPLIANCE NEWS |
The Board of Governors of the Federal Reserve System (Board), Consumer Financial Protection Bureau (CFPB or Bureau), Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA) and the Office of the Comptroller of the Currency (OCC) (collectively, the Agencies) issued guidance, Interagency Guidance Regarding Deposit Reconciliation Practices, to ensure financial institutions are aware of supervisory expectations relating to deposit reconciliation practices involving customer accounts.
This guidance comes less than a year after the CFPB required a Pennsylvania bank to refund $11 million to customers and pay $7.5 million in penalties for violating the prohibition against unfair and deceptive practices in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) for not crediting consumers the full amount of their deposits and for claiming that it would verify deposits even though the bank’s policy was not to verify and correct deposit inaccuracies unless they were above specific thresholds that, at times, were $50.
The guidance focuses on “credit discrepancies,” or those situations where a customer deposits an amount to an account, but indicates a lesser amount on the deposit slip (e.g., deposits $110, but only indicates $100 on the deposit slip). If these discrepancies are not reconciled it is a detriment to the customer and benefits the financial institution. The Agencies acknowledge that there are a variety of technological and other processes used to reconcile discrepancies in deposit accounts, but also indicate that they have observed instances where variances between the dollar value of the items deposited and the amount credited to the account are not researched at all.
The Agencies point out that not researching these types of discrepancies and not giving credit for the full amount of the actual deposit to the customer can lead to a variety of potential regulatory violations. Violations of the Expedited Funds Availability Act and Regulation CC may result if customers do not have timely access to the correct amount of funds. Violations for unfair, deceptive or abusive acts or practices under either Section 5 of the Federal Trade Commission Act (which prohibits unfair or deceptive acts or practices (UDAP)) or Section 1031 and 1036 of Dodd-Frank (which prohibits unfair, deceptive or abusive acts or practices (UDAAP)) may also be cited depending on the facts involved.
The Agencies expect financial institutions to have or adopt deposit reconciliation policies and practices that avoid or reconcile deposit discrepancies, and that resolve any discrepancies in a way that prevents potential harm to customers. Additionally, information and disclosures provided to customers that include information about the institution’s deposit reconciliation practices must be accurate. An effective compliance management system that ensures compliance with applicable laws and regulations and that customers are treated fairly will minimize the potential of financial loss and supervisory action.