What We Know

Federal Regulators Issue Interagency Guidelines Regarding Deposit Reconciliation Practices

May 31, 2016 | by Caren D. Enloe

The CFPB and four federal financial regulatory agencies have issued Interagency Guidance Regarding Deposit Reconciliation Practices. The Guidance comes as a follow up to the consent orders entered into last fall against Citizens Bank N.A., Citizens Bank of Pennsylvania and their parent company, Citizens Financial Group, Inc. regarding deposit discrepancies. The Guidance makes clear that the agencies have a zero tolerance policy as to deposit discrepancies and expect “financial institutions to adopt deposit reconciliation policies and practices that are designed to avoid or reconcile discrepancies, or designed to resolve discrepancies such that customers are not disadvantaged.” The agencies expect financial institutions to:

  • Effectively manage their deposit reconciliation practices;
  • Ensure that information provided to customers is accurate;
  • Implement effective compliance management systems that include appropriate policies, procedures, internal controls, training and oversight; and
  • Review processes to ensure compliance with applicable laws and regulations.

While the Guidance provides for a zero tolerance policy, financial institutions are reminded that they are not liable for “bona fide errors.”  To establish a bona fide error, a financial institution must demonstrate that a violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.  It is, therefore, imperative that financial institutions review their compliance management systems to ensure they:

  • Provide proper vendor management to ensure their service providers and affiliates properly and accurately resolve deposit discrepancies;
  • Include written policies and procedures for conducting audits to ensure deposits and deposit discrepancies are accurately handled, including the frequency, scope, and depth of said audits;
  • Put in place compliance measures, as well as policies, procedures and practices, to ensure accurate processing of deposits and deposit discrepancies;
  • Incorporate sufficient monitoring and oversight regarding the processing of deposits and deposit discrepancies;
  • Incorporate training of personnel to ensure accurate resolution of deposit discrepancies; and
  • Incorporate complaint procedures and processing to ensure deposit discrepancy complaints are identified, tracked and resolved in accordance with the Banks’ policies and procedures.

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Caren Enloe is a partner who concentrates her practice in consumer financial services litigation and compliance, bankruptcy, and commercial litigation with an emphasis on creditor’s rights. She has a deep understanding of the complex compliance environment surrounding the financial services industry and regularly advises financial service companies on licensing and compliance issues involving state and federal consumer protection and finance statutes. Caren is the author of a daily blog titled: Consumer Financial Services Litigation and Compliance where she posts timely and informative updates regarding the CFPB, FTC, and a host of topical litigation issues involving consumer protection law....LEARN MORE

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