Fees for products and services have been a long-established practice in the financial services industry.   Fee revenue is an important part of a financial institution’s income stream, especially as rate margins have shrunk and technology, labor, and inflationary costs have increased.  However, the philosophy behind fee impositions require a re-think.  Does the fee you charge either:

1. Provide countervailing benefits to consumers or competition; or
2. Actually compensate your institution for any costs incurred in providing a financial product or service?  

If not, the fee is likely going to be deemed to be exploitive.

The weight of this realization is heavy.  Fees may no longer be deterring or punitive (largely what overdraft fees were for decades) or unsupported.  Consider this list of fees already deemed to be unfair or deceptive, or under the microscope right now:

• Non-Sufficient Funds fees in general
• Multiple NSF fees for the same transaction (representment NSF fees)
• Overdraft Fees
  • Authorize Positive, Settle Negative Overdraft Fees
  • Unfair Unanticipated Overdraft Fees
• Unfair Statement Fees
• “Surprise” Depositor Fees: Returned Deposit Item Fees
• Credit Report Fees
• Loan Discount Points
• Lender’s Title Insurance
• Credit Card Late Fees

Do you see some fees your institution is charging on this list?  Of course – if you are in the business of banking, you have some such fees – but are they exploitive?  You need to know how regulatory opinions are shifting, to ensure your fees are reasonable and fair for the protection of your bank and your customers.

Also, it is important you know that the FTC has interpreted UDAP to apply to business accounts too.   Moreover, the FDIC has taken note of this legal interpretation, and clearly noted in their UDAP Exam manual that UDAP is not just a consumer protection matter, but extends to business accounts too.

If you find a fee issue, what should you do?  Should you provide restitution?  To whom, and for how long?  

During this Course, we paint the big picture, offers risk-management and compliance-management considerations, and dives into the some particulars of recent agency perspectives on junk fees. The more you know!