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Attention All Check Cashers!

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In a letter dated April 14, 2016 to the MAFSC, a representative of the DLLR stated the following:
“Clearly, the Licensee must send a notice of dishonor no less than 10 days after the dishonor in order to collect a $35 collection fee. The Commissioner has taken the position that pursuant to the plain language in the notice in CL 15-803, a Licensee may collect a $35 collection fee after mailing the notice dishonor.” The letter continued that licensees have until May 1, 2016 to correct their business practices to comply with their interpretation of the collection fee statute and to begin maintaining records “… of all notices of dishonor with proof of the date of mailing, and dated receipts of the $35 collection fee…” This grace period until 5/1/2016 does not affect any action by the DLLR on this matter previously enacted or in progress.

BEST PRACTICES: In order to comply with the DLLR’s new mandates regarding collecting fees on dishonored checks, the following actions are recommended to bring your business into compliance:

1. Post a ‘clearly conspicuous notice’ of the liability for the collection fee.
Collections fee lobby sign
2. Only accept the face value of the dishonored check if payment for the dishonored check is being made within ten (10) days of the dishonor.
3. After 10 days from the date of dishonor, send notice of dishonor.
Notice of dishonor template
4. After sending the notice, you may collect up to a $35 collection fee.
5. Maintain certificate of mailing & letter sent.
6. Issue a dated receipt for payment and maintain as part of your records.
7. Maintain a record of the date of dishonor (copy of bank notice?)
8. Add written policy & procedures to your compliance manual.
Manual Insert

Additional related documents:
Links to relevant statutes
MAFSC Fax Notice
New restrictions and requirements regarding the collection of fees
Letter to MAFSC from DLLR

Overdraft fees still generate confusion with consumers.

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Overdraft fees still generate confusion

It has been nearly four years since rules went into effect to clarify when banks may charge you penalties if you overdraw your checking account using your debit card. But many people remain confused about overdraft fees, a new report finds.

The report from the Pew Charitable Trusts found that in 2013, 10 percent of adults with checking accounts paid at least one overdraft fee — that is, a fee for a short-term advance from their bank to cover a shortage in their checking account. An additional 5 percent paid an overdraft transfer fee, charged for transferring funds from another account or a credit card. People who overdrew reported paying fees averaging $69. The typical overdraft fee was $35, but banks may add extra fees if the shortage isn’t covered quickly.

In 2010, federal rules took effect that required banks to ask customers to affirmatively choose — to opt in — if they wanted overdraft protection on their debit cards. That means that if you use your debit card to make a purchase or withdraw cash from an ATM, and overspend your balance, your bank will process the transaction and cover the shortage with a temporary advance, in exchange for a fee. If you don’t opt in, transactions are declined, with no fee.

Yet more than half of those who were charged an overdraft fee when using their debit card say they do not recall agreeing to the service, the Pew report found. That suggests the banks aren’t explaining their overdraft policies clearly and raises questions about how overdraft protection is marketed, the report said.

Susan Weinstock, director of consumer checking for Pew, said a suggested form for explaining overdraft options, provided by the Federal Reserve for use by banks, may be confusing for consumers. “That form needs some work,” she said. Pew has proposed a simple disclosure box that banks could use to explain overdraft options to their customers. “It would help resolve the confusion that we have seen is so prevalent in the marketplace,” she said.

Still, the report noted that the proportion of people who said they had paid at least one overdraft fee had declined two percentage points, from 12 percent in a survey Pew did in 2012. Weinstock said it was not clear what caused the decline. The proportion of people paying transfer fees was unchanged, at about 5 percent.

Overdraft fees are a big source of fee income for banks, the report notes. Banks collected an estimated $16.7 billion in such penalties in 2011, at least $6 billion of that brought in by debit card use.

The report is based on a telephone survey of more than 1,800 people by Social Science Research Solutions. The survey included people who had been charged overdraft and transfer fees, as well as people who had transactions declined and those who had never overdrawn. The margin of sampling error is plus or minus 2 percentage points.

Here are some additional questions about bank overdrafts:

Q: Are the rules the same for overdrafts caused by checks?

A: No. Banks are allowed to charge you a fee for paying a check, as well as some recurring electronic payments, that overdraws your account — even if you didn’t opt in to overdraft coverage.

Q: How can I avoid overdraft fees?

A: The Consumer Financial Protection Bureau advises that if you are being charged a lot of fees, you should consider telling your bank that you would like to opt out of overdraft coverage for debit purchases and ATM withdrawals. If you overspend, the transaction will be declined, but you won’t be charged a fee. Another alternative is to ask your bank about linking your checking account to a savings account or credit card. Funds can be transferred from that account to cover a shortage in your checking account. You will still be charged a fee, but it’s typically much lower than an overdraft fee. Pew found the typical transfer fee is $10.

Q: What if I didn’t opt in to overdraft coverage for debit card transactions, but I was charged a penalty anyway?

A: You can file a complaint with the Consumer Financial Protection Bureau. The agency is reviewing bank overdraft policies.

Mandatory Payroll Card Use Prompts U.S. Consumer Bureau Warning

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Mandatory Payroll Card Use Prompts U.S. Consumer Bureau Warning

The U.S. Consumer Financial Protection Bureau today said it will police employer usage of payroll cards to ensure workers don’t face hidden fees or other abuses.

“The bureau intends to use its enforcement authority to stop violations before they grow into systemic problems, maximize remediation to consumers, and deter future violations,” the agency said in an e-mailed statement.

The CFPB said it has received reports of employers, particularly in retail and food-service industries, requiring employees to receive wages only on payroll cards, a practice prohibited by law. The agency also said it has received complaints about unexpected fees for cash withdrawals, balance inquiries and other uses of the cards.

Payroll cards resemble prepaid debit cards, but are funded by wages paid by an employer. About 4.8 million of the payroll cards were issued in 2011, a number that is expected to grow to 8.4 million in 2015, according to a Mercator Advisory Group report from October 2012. The cards had $26.5 billion loaded onto them in 2011, and could have $46.3 billion in 2015, the Maynard, Massachusetts-based consultancy said.

Madeline Aufseeser, a senior analyst with the Boston-based Aite Group, a financial services consultancy, called the CFPB move “good for the industry and good for consumers” because it serves as a reminder to employers while relying on existing consumer-protection law instead of new regulations.

Bureau Jurisdiction

The consumer bureau, created by the 2010 Dodd-Frank law, has jurisdiction over payroll cards, and the ability to enforce the law against both employers and financial institutions that issue the cards, according to the statement. State law typically regulates what payment methods employers must offer, according to CFPB.

First Data Corp., which is owned by private equity firm Kohlberg Kravis Roberts & Co. (KKR), is the leader in the payroll card business, according to Aufseeser, with 49 percent of the market. JPMorgan Chase & Co. (JPM) and Brentwood, Tennessee-based Comdata Network Inc. each have about 5 percent of the market.

Employers “cannot mandate that their employees receive wages on a payroll card,” CFPB Director Richard Cordray said in an e-mailed statement. “And for those employees who choose to receive wages on a payroll card, they are entitled to certain federal protections.”

The law requires payroll card holders to receive disclosures outlining all fees associated with the card, access to the card account’s history, liability limits for unauthorized use and error-resolution procedures.

Legal 2016

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