A $144 million settlement with Wachovia Bank, N.A., and a new guidance by the Office of the Comptroller of the Currency ("OCC") may impact banks handling third party payment processors and deposits into bank accounts maintained by telemarketers.
On April 25, the OCC announced a settlement with Wachovia under which the bank agreed to make $125 million in restitution to consumers, pay civil money penalties of $10 million, and contribute approximately $8.9 million to consumer education programs. The OCC determined that Wachovia failed to properly underwrite and monitor certain telemarketers and third party payment processors in connection with remotely created checks ("RCCs") deposited into bank accounts maintained by the telemarketers at Wachovia. RCCs are checks prepared on a customer’s account through an oral authorization provided by the customer. The OCC claimed Wachovia ignored high return rates and complaints regarding the RCCs processed through their customer’s deposit accounts.
Simultaneous with announcing the settlement, the agency released OCC Bulletin 2008-12 providing certain risk management guidance in connection with payment processors. The guidance indicates that national banks must engage in due diligence and underwriting in connection with accepting account relationships, particularly those involving high volume payment processors. The OCC also indicated that it expects national banks to monitor these type of "high risk accounts" for increases in unauthorized returns and for suspicious or unusual activity. The guidance indicates that it applies to customers depositing RCCs and to ACH entry activity.
If your financial institution has deposit account relationships with telemarketers or payment processors, your third party vendor management policies and procedures will need to take the OCC’s guidance into account. If you have questions regarding and would like assistance with these policies and procedures or the OCC Bulletin, please contact one of our banking and financial services attorneys.