On May 18, 2016, The Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System (FRB), the Consumer Financial Protection Bureau (CFPB), the National Credit Union Administration (NCUA) and the Office of the Comptroller of the Currency (OCC) (collectively, the Agencies) issued guidance to financial institutions on the Agencies’ supervisory expectations of deposit-reconciliation practices that may be detrimental to customers.1
Deposit reconciliation is required when the amount credited to the customer’s account differs from the total of the items deposited (e.g. customer deposits $50 but only $40 was credited). These discrepancies can occur due to a variety of scenarios, including discrepancies between the deposit slip and the check, and poor check image-capture.
If these discrepancies are left unreconciled, then the customer experiences financial loss. The agency does acknowledge, however, that there are limited scenarios where a deposit cannot be reconciled (e.g. the check is damaged to the point where you cannot determine the actual amount).
There are several regulations that govern deposit reconciliation practices including:
- Expedited Funds Availability Act (implemented by Reg CC) requires that financial institutions make deposited funds readily available within pre-defined time limits2
- Section 5 of the Federal Trade Commission Act prohibits institutions from engaging in unfair or deceptive practices3
- Section 1031 and 1036 of Dodd-Frank Act prohibits institutions from engaging in unfair, deceptive, or abusive acts or practices.4
Supervisory Expectations from the Agencies
- Financial institutions to implement policies and procedures to comply with applicable laws and regulations and the fair treatment of customers
- Policies and procedures to be designed to prevent these discrepancies from occurring, or designed to resolve the discrepancies within a reasonable amount of time and to prevent any potential harm to customers
- These policies and procedures should include internal controls, training, communications, oversight, and review processes
- Financial institutions should provide accurate information to its clients regarding the deposit reconciliation practices
What Organizations Can Do Now to Prepare
- Develop reporting for reconciliation discrepancies and policies/procedures/training to help address the discrepancies in a reasonable amount of time
- Create supervisory procedures to address discrepancies
- Develop communications to customers on reconciliation practices
Note: This Financial Institution Letter applies to all FDIC-supervised financial institutions.
- “Interagency Guidance Regarding Deposit Reconciliation Practices.” Board of Governors of the Federal Reserve System, Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, May 18, 2016. Access at https://www.fdic.gov/news/news/financial/2016/fil16035a.pdf
- “Regulation CC: Availability of Funds and Collection of Checks, 12 CFR 229,” Board of Governors of the Federal Reserve System, Compliance Guide to Small Entities, Regulations. Access at https://www.federalreserve.gov/bankinforeg/regcccg.htm
- “Federal Trade Commission Act – Section 5: Unfair or Deceptive Acts or Practices,” Federal Trade Commission. Access at: https://www.federalreserve.gov/boarddocs/supmanual/cch/ftca.pdf
- “Dodd-Frank Wall Street Reform and Consumer Protection Act,” United States Government Publishing Office, Public Law 111-203—July 21, 2010. Access at https://www.gpo.gov/fdsys/pkg/PLAW-111publ203/pdf/PLAW-111publ203.pdf
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