Banks should avoid or reconcile, or resolve discrepancies between the amount they credit to a consumer’s account and how much was actually deposited, according to guidance issued by the Consumer Financial Protection Bureau and other regulatory agencies.
The guidance reiterated the responsibility of 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,” the bureau said. “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.”
Whether discrepancies result in under- or over-credited accounts, there is a long-standing practice of honoring the deposit slip amount submitted by the consumer – even when it differs slightly from the actual amount deposited. The CFPB, however, began focusing on this as the Dodd-Frank Act called it a deceptive practice. It may also cause violations of Regulation CC, which requires that financial institutions make funds deposited in a transaction account available for withdrawal within prescribed time limits.
“Consumers should not be denied timely access to the full amount of their deposits,” said CFPB Director Richard Cordray. “Today’s guidance should make it clear that we expect financial institutions to take steps to handle and resolve deposit discrepancies and avoid consumer harm.”
The issue was brought to prominence last summer when Citizens Bank of Pennsylvania was hit with fines by three regulators − the CFPB, FDIC and the Office of the Comptroller of the Currency – for the practice. On August 12, 2015, the regulators ordered Citizens to pay $14 million in refunds to consumers and another $20.5 million penalty, broken up among the three regulators.
The bureau joined with the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration and the Office of the Comptroller of the Currency in issuing the guidance.