OCC And FDIC Provide Supervisory Guidance On Certain Overdraft Practices

The Office of the Comptroller of the Currency ("OCC") and the Federal Deposit Insurance Corporation ("FDIC") (collectively, the "Agencies") provided supervisory guidance this week on certain overdraft practices. Of particular focus are "Authorize Positive, Settle Negative" ("APSN") practices.

Prior to this guidance, banks were generally allowed to use their own judgment to ascertain when a particular overdraft charge would apply to transactions coming in, as long as they disclosed their methodology to consumers. However, many institutions have found − usually through customer complaints or lawsuits − that consumers are regularly confused by the methodology disclosures.

Accordingly, APSN transactions, as the name suggests, are transactions where a customer has sufficient account balances at the time the transaction is initiated (e.g., a debit card transaction at a point of sale), but as other transactions are processed, the authorized transaction settles against