Income from Fees on Nonsufficient Funds and Overdraft Charges
SB 1415 was signed into law by Governor Newsom. It requires state-chartered banks and credit unions to notify the Department of Financial Protection and Innovation (DFPI) annually of the revenue they received from fees on nonsufficient funds and overdraft charges during the calendar year. These reports are due by March 1 so the DFPI can publish the information on its website by March 31.
Please refer to the FAQs below or contact Derek Nelson at derek.nelson@dfpi.ca.gov (banks) or Kim-Phuong Hoang at kim-phuong.hoang@dfpi.ca.gov (credit unions) for more information.
SB 1415 FAQs for State-Chartered Banks and Credit Unions
“Nonsufficient funds (NSF) fees” means fees resulting from the initiation of a transaction that exceeds the customer’s account balance if the customer’s bank or credit union declines to make the payment.
“Overdraft (OD) fees” means fees resulting from the processing of a debit transaction that exceeds a customer’s account balance.
1) How will we report the required information?
On December 30th, we sent an email with a report link to the designated email address of each reporting institution. The email was sent from the survey@dfpi.ca.gov email address. The link goes to a web form on the FORM.com website which each reporting institution will complete and submit.
2) Why didn’t my institution get an email with a report link?
This reporting requirement only applies to state-chartered banks and credit unions. If the reporting requirement applies to your institution and an email was not received, please email the respective contact person.
3) My institution does not charge NSF or OD fees. Do I need to complete this report?
Yes. A response is required for all applicable institutions, even if the fees are not charged. Each institution will need to attest to the accuracy of the reported information.
4) If my institution is unable to meet the filing deadline, will a late filing fee or penalty be assessed?
Yes. A penalty may be assessed for late filings.
5) Should reported figures include fees collected from commercial accounts?
Yes. SB 1415 did not specify reporting only on consumer accounts; therefore, report both NSF and OD fees accordingly.
6) Should uncollected fees or reversed fees be reported?
No. Only report collected fees. If collected and reversed fees are tracked separately, then report the net amount for each category.
7) In which category would bounce protection fees be reported?
Bounce-protection fees are reported as OD since the debit transaction was honored with other funds.
8) In which category would courtesy pay fees be reported?
Courtesy pay fees are reported as an OD fee since the debit transaction was honored with other funds.
9) In which category would a returned check, ACH, and debit card fees be reported?
If the transaction was declined, report the fee as NSF. However, if the transaction was honored with other funds, report the fee as OD.
10) In which category would returned-deposit fees be reported?
Returned-deposit fees are reported as NSF, since the transaction was presumably declined.
11) We charge an overdraft transfer fee when funds are transferred from a savings account, line-of-credit, credit card, HELOC, etc. to process the debit transaction. In which category would such fees be reported?
Transfer fees are reported as OD since the debit transaction was honored with other funds.
12) We charge daily interest on negative accounts. Would such interest income be included?
Yes. Such interest income is the result of an OD transaction honored with other funds causing the negative balance and should be reported as OD fees.
13) For negative balances that are subsequently converted to a loan, should interest income from the loan be included?
No. Such interest income is no longer considered part of the OD program.
14) We charge an uncollected-funds fee for pending deposits with a subsequent debit transaction that would overdraw the account. In which category would this be reported?
If the purchase transaction was declined, then it is reported as NSF. If the purchase transaction was honored with other funds, then report it as OD.
15) We are headquartered in California and have branches out of state. Would NSF and OD fees collected from outside California be included?
Yes. The out-of-state branches are subject to the examination authority of the Commissioner.
16) We are headquartered outside of California but have branches in the state. Are we subject to the reporting requirements?
No. The Department does not ordinarily examine out-of-state banks or credit unions with offices in California; therefore, your institution is not considered to be subject to the examination authority of the Commissioner.
17) We have wholly owned subsidiaries and have consolidated financial statements. Would we report net income based on our non-consolidated or consolidated financial statements?
Report net income in accordance with GAAP. Therefore, consolidated net income should be reported as follows:
- Banks – Form FFIEC 031-051, Schedule RI, Item 14.
- Credit unions – Form NCUA 5300, Statement of Income and Expense, Line 35.