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Adopted Regulations

Amendment to General Regulations of the Banking Board Part 32

February 2, 2006

MAXIMUM CHARGES FOR PAYMENTS MADE AGAINST INSUFFICIENT FUNDS, UNCOLLECTED BALANCES AND RETURN ITEMS; CERTAIN DISCLOSURES

(Statutory authority: Banking Law, Sections 14(1), 108(8),
202[(8)], 235-c, 383(13))

Section 32.1(a) is amended to read as follows:

§ 32.1 Maximum charges.

  1. Insufficient funds. The establishment of [a charge] charges that [is] are imposed by a bank, trust company, savings bank, savings and loan association or licensed branch of a foreign banking corporation (collectively for purposes of this part a “banking institution”) in connection with a check drawn or other written order [drawn] upon, or electronic transfer sought to be effectuated against, insufficient funds or uncollected balances, [irrespective] irrespective of whether the check, order [instrument] or electronic transaction (collectively for purposes of this part an “item”) is paid, accepted or returned by the banking institution [bank, trust company, savings bank, savings and loan association or licensed branch of a foreign banking corporation], is a business decision to be made by each banking institution [bank, trust company, savings bank, savings and loan association or licensed branch of a foreign banking corporation], in its discretion, according to sound banking judgment and safe and sound banking principles. A [bank, trust company, savings bank, savings and loan association or licensed branch of a foreign banking corporation] banking institution shall be deemed to have reasonably [establishes] established such [a charge] charges if it [considers] considered the following factors, among others:
  1. the cost incurred by the banking institution [bank, trust company, savings bank, savings and loan association or licensed branch of a foreign banking corporation], plus a profit margin, in providing the service;
  2. the deterrence of misuse by customers of banking services;
  3. the enhancement of the competitive position of the banking institution [bank, trust company, savings bank, savings and loan association or licensed branch of a foreign banking corporation] in accordance with its marketing strategy; and
  4. the maintenance of the safety and soundness of the banking institution [bank, trust company, savings bank, savings and loan association or licensed branch of a foreign banking corporation]. 

In establishing charges under this subdivision, a banking institution may consider the nature of the account and may determine to establish different charges for an account that is opened and maintained primarily for personal, household or family purposes than for an account that is not, and, in determining such charges, may also consider whether the item is to be paid, accepted or returned.

Section 32.4 is amended to read as follows:

§ 32.4 Required disclosures.

In addition to any disclosure required by Part 13 of the General Regulations of the Banking Board, with regard to consumer deposit accounts, a [bank, trust company, savings bank, savings and loan association or licensed branch of a foreign banking corporation] banking institution shall disclose in writing to its depositors the order in which it pays [checks] items drawn against a depositor’s account. By way of illustration, and without limitation, such disclosure may inform the depositor that the [banking organization] banking institution pays the largest [checks] items first, the smallest [checks] items first, or by the number of the [check] item or in the order received. Such disclosure shall be given to the depositor at the time the account is opened and 30 days prior to the time the payment policy is changed. For existing accounts, such disclosure shall be provided within 120 days of the effective date of this section.

Explanatory All Institutions Letter