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The Minnesota Bankers Association (MBA) and Minnesota-based Lake Central Bank jointly filed a lawsuit against the Federal Deposit Insurance Corporation (FDIC) last week over guidance that they say exceeds the agency's statutory authority.
The guidance, which was issued in August of 2022, addresses multiple non-sufficient funds (NSF) fees charged to customers for transactions presented multiple times against insufficient funds in their accounts. The FDIC said the failure to disclose the practice to customers could violate Section 5 of the Federal Trade Commission Act which prohibits unfair or deceptive acts or practices (UDAP).
The lawsuit argues that the agency lacks statutory authority to “define with specificity acts or practices which are unfair or deceptive.” “The FDIC did not have authority to amend existing bank disclosure regulations and did not have authority to issue a substantive UDAP rule," the MBA said in a statement.
The plaintiffs also assert that, despite being labeled as “supervisory guidance,” the FDIC's action is, in fact, a legislative rule that was not subjected to notice and comment rulemaking as required by the Administrative Procedure Act. They also contend that the action is “arbitrary and capricious,” noting that the FDIC did not consider several concerns relating to the new policy and failed to provide a “reasoned explanation for the sudden changes.”
“I applaud the MBA for their leadership in filing this lawsuit against the FDIC. Their action highlights the need for regulatory accountability,” said NBA President and CEO Richard Baier. “We stand united with the MBA in advocating for a fair and transparent regulatory environment that benefits the entire banking industry.”
Read the Lawsuit
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