Fee Increase Notifications for Levies and Garnishments

Issue/Inquiry

The Bank wants to increase its fee for handling levies and garnishments. How would it make and disclose this change, as per regulatory requirements?

Response Summary

The Bank is not required under Regulation DD to provide advance notice of the fee for handling levies and garnishments, since the Bank was not required to disclose this fee when the account was opened. As a matter of good practice, however, and with UDAAP considerations in mind, the Bank should notify affected customers of the change, such as in a notice with the periodic statement.

Response Detail

Under Regulation DD, the Bank is required to provide advance notice to affected consumers of any change in a term required to be disclosed in the account opening disclosures, if the change may reduce the annual percentage yield or adversely affect the consumer. The notice shall include the effective date of the change and be mailed or delivered at least 30 calendar days before that date. 12 CFR §1030.5(a)(1).

Among the disclosures when an account is opened is “the amount of any fee that may be imposed in connection with an account.” Such a fee, however, does not include “incidental fees,” which are defined as “fees associated with state escheat laws, garnishment or attorney’s fees, and fees for photocopying.” 12 CFR §1030.4(b)(4); Official Interpretations, ¶4(b)(4)-2(ii).

Therefore, for the purposes of Regulation DD, it will not be necessary to provide advance notice of the change in the fee for handling levies and garnishments. As per the contract between the Bank and the customer, however, and with UDAAP considerations in mind, the Bank should notify affected customers of the change. This could be completed by providing a change-in-terms notice concurrent with the change as part of the periodic statement.

 

 

This entry was posted on Monday, June 6th, 2016 at 3:00 pm.