Ask the expert: Bank procedures for posting transactions
October 26, 2010
Q: Why is it that a bank can charge an overdraft fee on a Sunday (when banks are closed) but can't be credited for a mortgage payment on a Sunday?
A: That is an excellent question, and you are probably not going to be totally satisfied with the answer.
The truth is that banks have a fair amount of latitude with regard to what are called "posting procedures." Posting is the formal recognition of bank transactions.
An example of this latitude? Suppose you have a $50 balance in your checking account, and overdraft your account by writing checks in the following amounts, in this order: $5, $10, $20, $50. In reality, it would only be the last check that would overdraft your account, so you'd expect to be subject to one overdraft fee. However, you might find that your checks were posted from largest to smallest. In this case, everything after the first check would be an overdraft, and you'd be subject to three overdraft fees.
In the case of any given bank, you'll probably find information about posting procedures nestled deep within their discosure documents for checking accounts, savings accounts, mortgage loan agreements and other accounts.
Given the latitude they have, chances are those posting procedures will be somewhat stacked in the bank's favor. This is probably the type of thing that started out with some common-sense cushions designed to protect the banks, but over time drifted into the realm of squeezing ever more profits out of customers.
This past August, the FDIC did send a cautionary letter to financial institutions which, among other things, touched on posting procedures as they affect overdrafts. However, the letter did not outline any specific guidelines -- it pretty much just said, "we'll be watching you, and we expect you to be fair." It remains to be seen whether the FDIC will follow through by cracking down on any specific posting procedures.
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