Have you taken a look at your receipt after buying several items at the store or eating a good meal at a restaurant, only to find out that you haven’t been charged for something you got? Or that you were charged for something extra that you didn’t actually order or want? Besides feeling somewhat more fortunate, or unfortunate than usual, you might feel (especially in the latter case) like you need to go back and make things add up.
A small discrepancy on your restaurant bill isn’t of much importance, but discrepancies in the accounts of financial institutions are a much bigger deal. In May of this year, the CFPB, the OCC, the FDIC, the NCUA, and the Fed issued the Interagency Guidance Regarding Reconciliation Practices for deposit discrepancies. The guidance focuses on the correct way to handle those discrepancies.
When customers deposit money into their accounts, the amount the financial institution actually puts in their accounts sometimes doesn’t match up. Discrepancies between intended deposit amounts and actual deposit amounts happen for a variety of reasons. Maybe the deposit slip was written sloppily or inaccurately, or there was a glitch in the image-capture process.
No matter the cause, these differences, known as “deposit discrepancies” or “credit discrepancies,” may benefit your financial institution when not appropriately reconciled, but they also may hurt your consumers. And according to this guidance, those benefits will be short-lived if your reconciliation practices merit an agency’s action.
After their research found that several financial institutions make little to no effort to research or correct the differences between the dollar value of deposits and credits, the agencies found it necessary to remind financial institutions of various laws that are applicable in such situations. Here are the laws they identified:
- The Expedited Funds Availability Act, under Regulation CC, requires financial institutions to make funds that were deposited to an account available for withdrawal within a certain time limit. If an institution does not credit an account the right amount, it runs the risk of violating this statute by not making the funds available for withdrawal. This exposes institutions to civil liability and possible disciplinary action.
- The Federal Trade Commission Act, prohibits institutions from performing any unfair or deceptive acts. The agencies point out that pocketing money that was meant to go into a consumer’s account certainly falls under the category of “unfair” or “deceptive.”
- Sections 1031 and 1036 of Dodd-Frank also prohibit financial institutions from engaging in any “unfair, deceptive, or abusive acts or practices.” If your institution’s reconciliation practices regarding transaction and non-transaction accounts result in credit discrepancies, you may be violating Dodd-Frank.
The agencies expect financial institutions to implement policies that are designed to reconcile or, better still, avoid, discrepancies. So what can financial institutions expect to happen if they fail to comply with the statues? Here, for example, is what happened to one bank in Pennsylvania: In August 2015, Citizens Bank faced a $7.5 million penalty for failing to credit consumers the correct amounts of their deposited funds. It also had to dole out about $11 million in refunds to its consumers.
Not only do deposit discrepancies hurt your consumers, they can also end up seriously hurting your institution’s reputation if you aren’t doing everything you can to reconcile them.
While the agencies acknowledge that certain extenuating circumstances may arise where the deposit slip is damaged and the amount simply cannot be determined, they expect financial institutions to employ practices to reconcile deposit discrepancies wherever possible.
If your institution doesn’t have a policy surrounding deposit discrepancies, now is the time to make one. If you do have a reconciliation policy, now may be a good time to review it, because the agencies have made clear that this is an area that is on their radar and that they’re willing to dole out sizable penalties where they find discrepancy practices lacking.