On behalf of the American Bankers Association (ABA), I write to express the banking industry's concern with the Federal Deposit Insurance Corporation's (FDIC) issuance of guidance to announce new regulatory expectations for banks' nonsufficient funds (NSF) fee practices.
Our members value agency guidance that clarifies existing law and regulation, and we encourage the use of guidance for this purpose. However, bankers object to the issuance of guidance, without the opportunity for advance stakeholder comment, when that guidance changes existing law, regulation, or official commentary and is applied retrospectively. In 2021, the FDIC established new expectations—effectively changing existing law—regarding NSF fees through a Financial Institution Letter issued in August 20222 (FIL) and revised in June 2023 (Revised FIL).
As discussed in ABA's white paper, Effective Agency Guidance, the issuance of these guidance documents reflects a failure to follow the mandatory process of the Administrative Procedure Act (APA), which is required for guidance that is the equivalent of a binding "legislative rule." Under the APA, legislative rules must be the product of the "notice-and-comment" rulemaking process. The agency must issue a proposal, seek public comment, and then publish a final rule that incorporates and responds to the comments received.7 The FDIC failed to follow the APA's notice-and-comment process when issuing the FIL and Revised FIL, which we believe constitute legislative rules. In fact, the FDIC does not have the authority to issue a rule that defines specific acts or practices as unfair or deceptive under section 5 of the Federal Trade Commission (FTC) Act, as the FDIC effectively did in this case.
