CPB Home Press Releases Consumer Links Search

Banks and Banking

Introduction There are numerous entities offering financial services to New Yorkers. Therefore, in order to take advantage of such services and maximize cost effectiveness, it is critical for consumers to be familiar with the providers. Should the circumstance arise, it is also important for consumers to know where to go to file a complaint. Click on the link below to find more information about this topic.

• Types of Banks
• Disclosures
• Information on fees and charges
• Information on interest rates
• Periodic Statements
• Basic Banking Accounts
• Deposits
• Deposit Insurance
• Availability of Deposits
• Proof of Deposit
• Check 21
• Charges and Fees
• Insufficient Funds (“NSF” or “Bounced Check”) Charges
• Processing Fee by Holder of Dishonored Check
• Overdraft Protection
• Off-Set Against Other Funds
• Check Cashing
• Conducting Transactions
• Electronic Banking
• Credit Billing and Electronic Fund Transfer Statements
• Automated Teller Machines (ATMs)
• ATM Safety
• ATM Fees
• Debit and Stored Value Cards
• Unauthorized Transfers and Stolen ATM Cards
• Computer or Clerical Errors
• Interest Rates
• Abandoned Property (Finding a Lost Account)

Types of Banks

The following chart summarizes the various types of financial institutions offering banking services:

Disclosures

§ 12 U.S.C. § 4301

All depository institutions must comply with the federal Truth in Savings Act,¹ which requires them to disclose all pertinent information and policies concerning savings and time deposit accounts. A disclosure brochure containing the following information must be provided to a customer when the first deposit is made:

Information on fees and charges

1. A description of all fees, periodic service charges, and penalties which may be charged or assessed against the account (or against the account holder in connection with such account); the amount of any such fees, charges, or penalties (or the method by which such amount will be calculated); and, the conditions under which any such charge will be assessed.
2. All minimum balance requirements that affect fees, charges, and penalties, including a clear description of how each such minimum balance is calculated.
3. Any minimum amount required with respect to the initial deposit in order to open the account.

Information on interest rates

1. Any annual percentage yield (APY). An APY tells the consumer how much money would be made, as a percentage, if an account was kept for a year.
2. The period during which any such annual percentage yield will be in effect.
3. Any annual rate of simple interest.
4. The frequency with which interest will be compounded and credited.
5. A clear description of the method used to determine the balance on which interest is paid.
6. Any minimum balance which must be maintained to earn the rates and yields disclosed, as well as a clear description of how any such minimum balance is calculated.
7. Any minimum time requirement which must be met in order to obtain the yields disclosed, as well as a description of what will be received if the time requirement is not met.
8. Any requirement relating to nonpayment of interest, including a charge or penalty for early withdrawal, and the conditions under which such penalty may be assessed.

Periodic Statements

Banks must provide their customers with monthly account statements. This statement provides for every transaction made involving the customer’s account, including: electronic fund transfers, deposits, checks drawn, locations of transactions, service charges, fees, and beginning and closing account balances. The statement must also set forth the number of reporting days for the statement and the amount of interest earned (if any).

If there is a disparity in a monthly statement, the consumer should notify the bank within sixty (60) days of receiving the statement. The bank may require that this notification be in writing. Within ten (10) days of receiving a complaint, a banking institution must investigate the complaint. If the investigation cannot be completed within the ten (10) day time period, the bank may take up to forty-five (45) days if it first provisionally credits the customer’s account within ten (10) days of receiving a notice of dispute. Finally, the banking institution must report its findings to the consumer within three (3) days after the conclusion of the investigation.

Credit Unions are not required to provide periodic statements.

Basic Banking Accounts

§ N.Y. Banking Law § 14-f

Under New York State law, banks are required to offer low cost banking services. All banking institutions in the State, including commercial banks, savings banks, and credit unions, are required to offer "Basic Banking" accounts, sometimes known as "Lifeline accounts," to any and all customers.

As the cost to maintain a checking account continues to rise and consolidation in the banking industry provides fewer choices for consumers, Basic Banking becomes more important than ever. Benefits of using a Basic Banking account include: opening the account with a deposit of only twenty-five dollars ($25); having a minimum balance of only a penny; being charged no more than three dollars ($3) per month to maintain the account; making eight (8) withdrawals per month without a charge; and having no minimum monthly deposits.

Consumers may contact the New York State Banking Department’s Consumer Help Line at 1-877-BANK-NYS for further information. Consumers having difficulty finding a banking institution that will open a Basic Banking account, should contact the consumer helpline of the Office of the NYS Attorney General at 1-800-771-7755.

Deposits

§ 12 C.F.R. § 229
§ N.Y. U.C.C. Law Art. 4

Deposit Insurance

The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government that protects against the loss of insured deposits if an FDIC-insured bank or saving association fails. Up to $250,000 per depositor is insured at all banks bearing the FDIC insignia.² Multiple accounts at a single bank are added together for insurance purposes. For more information about insurance of bank deposits, contact the Federal Deposit Insurance Corporation at 1-877-ASK-FDIC (1-877-275-3342).

Availability of Deposits

Many consumers find that after depositing a check into their bank account, their deposit is not immediately available. The availability of funds is governed by Regulation CC of the Federal Reserve Board and Part 34 of the General Regulations of the New York State Banking Board. Funds availability generally depends upon three (3) factors:

• Where the check is drawn (e.g., local or out of town institution);
  
• The dollar amount of the deposit; and,
  
• The issuer of the check (e.g., governmental or private sector unit).
  

Financial institutions are required to post a notice of their funds availability policy for consumer accounts in each location where it accepts consumer deposits.

Proof of Deposit

When depositing a check into an account, a receipt should be given to the consumer by the bank teller. If the bank misplaces the check, they may refuse to credit the account until the writer of the check is contacted. It is important to keep track of all checks written and to save all deposit slips until the consumer receives a statement from the bank with the correct account balance.

A check is deposited subject to collection, and any credit granted is temporary until the check clears. Under the New York Uniform Commercial Code (U.C.C.), the funds are not actually credited to the account until the bank is paid by the check writer’s bank. If the bank loses the check after the deposit, the consumer is responsible for contacting the issuer of the check to determine whether the check was indeed cashed or to have the maker reissue a new check. It is up to the issuer of the check to decide whether they would like to stop payment on the lost check. If the original check is cleared, the bank assumes responsibility for the check; otherwise the bank is not responsible for the stop payment fee.

Check 21

“Check 21” is a federal regulation which allows banks to process and deliver checks electronically and to print special copies or electronic reproductions of checks instead of transporting or holding onto original paper checks. This special copy or electronic reproduction is called an image replacement document (IRD) or a “substitute check”. The substitute check is considered the legal equivalent of the original check and should contain an image of the front and back of the original check. Banks are allowed to keep substitute checks in lieu of the originals. It should be noted, that consumers may be able to receive paper copies by inquiring with the specific institution, if desired. To learn more about Check 21 visit http://www.federalreserve.gov/paymentsystems/truncation/.

Charges and Fees

Insufficient Funds (“NSF” or “Bounced Check”) Charges

§ N.Y. General Obligations Law § 11-104
§ 3 N.Y.C.R.R. § 32.1

The term “bounce” is commonly used to describe the act of drafting a check in an amount exceeding the balance available in an account. A bank or trust may charge no more than ten dollars ($10) when its customer deposits a check that is dishonored by the issuing bank. State banking regulations permit a charge to be levied every time a person bounces a check.

Persons whose checks have bounced may also be liable to the holder of the check for up to twice the face amount of the check, or seven hundred and fifty dollars ($750.00), whichever is less. The holder of the check may sue for these penalties after two (2) notices demanding payment for the face value of the original check have been sent to the person who wrote the check.

More importantly, a bank may close an account if there are too many NSF charges. As a result, it may be difficult to open an account with another financial institution.

Processing Fee by Holder of Dishonored Check

The holder or person seeking the value of a dishonored check, which has been drawn by a bank but not paid, or is returned by the bank due to insufficient funds, may collect from, charge, or add to, the outstanding balance of the dishonored check from the person who had drawn the check initially. Additionally, the holder of a dishonored check, other than a money order, bank cashier’s check, or certified check, may charge or collect from the maker or drawer the amount of twenty dollars ($20) for the return of such unpaid or dishonored instrument.³

Overdraft Protection

§ 12 U.S.C. § 4301 et seq.

Overdraft occurs when an account holder has withdrawn more money from a bank account than was available in the account. Unlike a bounced check, where the bank refuses to honor a check due to insufficient funds, an overdraft allows the transaction to proceed, with the bank paying the difference. The account holder is then responsible for paying back the amount of the overdraft to the bank, plus any associated fees, which are usually substantial. To minimize these fees, account holders will often arrange overdraft protection for an account, usually in the form of an automatic transfer from a savings account or a line-of-credit.

Under federal law, specifically, Regulation DD, which implements the Truth in Savings Act (TISA), depository institutions are required to disclose, (among other things) the amount of any fee that may be imposed in connection with an account and the condition under which such fees are imposed.⁴ Additionally, under New York law, when an account is opened, a bank must disclose the order in which account charges will be processed in the event of an overdraft (the two most common forms are chronological order and a “largest check first method.”) Whenever a bank makes a change to this policy, it must notify account holders of the change within thirty (30) days.

Off-Set Against Other Funds

Banking institutions may take any money they are owed directly from customers’ accounts provided that they have given the consumer notice. This is called “off-set.” The customer should also be provided with a reason for the offset when it occurs. Off-sets are not permitted for accounts receiving direct deposits of Social Security funds. In addition, banks are prevented from offsetting funds from a line-of-credit account unless the customer specifically authorizes this activity.

Check Cashing

§ N.Y. Banking Law § 374(3)
§ N.Y. Banking Law Article 9-A

A bank has the right not to cash a check if the consumer has no account relationship with it. Employers can make arrangements to cash payroll checks at a particular bank. In addition, check cashiers can choose which checks to cash. Local check cashiers sometimes refuse to cash checks more than one week old. All check cashing businesses must be licensed by the State Banking Department and must adhere to the service fee limitations set by the State Superintendent of Banks.

Conducting Transactions

§ 15 U.S.C. § 1693 et seq.,br> § 15 U.S.C. § 1666 et seq.

Electronic Banking

Electronic banking, also known as electronic fund transfer technology (EFT), uses computers and electronic technology as a substitute for checks and other paper transactions.

Credit Billing and Electronic Fund Transfer Statements

It is important to check credit billing and electronic fund transfer account statements regularly. These documents may contain mistakes that could damage credit status or reflect improper charges or transfers. If an error or discrepancy is discovered, notify the company and dispute the error immediately. The Fair Credit Billing Act (FCBA) and Electronic Fund Transfer Act (EFTA) establish procedures for resolving mistakes on credit billing and electronic fund transfer account statements, including:

• Charges or electronic fund transfers that anyone authorized to use the account has not made;
  
• Charges or electronic fund transfers that are incorrectly identified or show the wrong amount or date;
  
• Computational or comparable errors;
  
• Failure to reflect payments, credits, or electronic fund transfers properly; not mailing or delivering credit billing statements to a current address, as long as that address was received by the creditor in writing at least twenty (20) days before the billing period ended; and,
  
• Charges or electronic fund transfers for which an explanation or documentation was requested, due to a possible error. ⁵

The FCBA generally applies only to “open end” credit accounts -- credit cards, revolving charge accounts (such as department store accounts), and overdraft checking accounts. It does not apply to loans or credit sales that are paid according to a fixed schedule until the entire amount is paid back, such as an automobile loan. The EFTA applies to electronic fund transfers, such as those involving automatic teller machines (ATMs), point-of-sale debit transactions, and other electronic banking transactions.

Automated Teller Machines (ATMs)

§ N.Y. Banking Law §§ 75a-75o

ATMs provide consumers with a convenient means of electronically accessing their bank accounts at any time of the day. Consumers are issued magnetically encoded cards which permit transactions including withdrawals or deposits by the consumer at any participating ATM with a corresponding credit or debit to the consumer’s bank account.

ATM Safety

§ N.Y. Banking Law § 75-a et seq.

The ATM Safety Act is applicable to all federal and State chartered banking institutions (including credit unions) operating ATM facilities in New York State. The ATM Safety Act requires certain facilities to comply with customer safety design standards.

ATMs available after regular banking hours are subject to the following safety requirements:

Surveillance Cameras and Adequate Lighting. These cameras are used to view and record all persons entering an ATM facility located within the interior of a building. Alternately, they must view and record all activity occurring within a minimum of three (3) feet in front of an automated teller machine located outside a building and open to the outdoor air.

Locking Doors for Indoor ATM Facilities. Entry doors must be equipped with locking devices that permit entry to the facility only to persons using a magnetic strip plastic card or similar access device.

Visibility of indoor ATMs from Outside. There should be an unobstructed view from the outside of the interior of the ATM facility, if possible. Reflective mirrors, as necessary, should be placed in such a manner as to permit a person entering an indoor ATM facility to view areas that would be otherwise concealed from view.

A Clearly Visible Sign Providing, At Minimum the Following:

• Notice that surveillance cameras are being used;
  
  
• A warning advising customers to close the entry door completely upon entering and exiting, and not to permit unknown persons to enter the area after regular banking hours;
  
  
• A warning advising customers to place their withdrawn cash securely upon their person before exiting the automated teller machine facility; and,
  
  
• Contact information concerning complaints or inquiries about security in the automated teller machine facility which should then be directed to the banking institution's security department or the New York Banking Department. This sign should provide the telephone numbers for such complaints, and advise consumers to find the nearest available public telephone to call the police if emergency assistance is needed.

Complaints concerning ATM safety and operation should be directed to:

New York State Banking Department
ATM Compliance
One State Street
New York, NY 10004-1417
1 877-BANK-NYS (1 877 226 5697)

ATM Fees

Many banks charge customers from other banking institutions a fee for using their ATMs. These fees may be in addition to the fees charged by the customer’s own bank.

ATM fees for a transaction can range from one to three dollars ($1.00 - $3.00), or even higher. Consumers wishing to avoid ATM surcharges should use only ATMs serviced by their home bank. Consumers can also continue to write checks and utilize over-the-counter transactions at their home bank. Most ATMs indicate what type of fee, if any, will be charged to the account before the transaction is completed. Consumers can decline the transaction if the fee seems too unreasonable.

Debit and Stored Value Cards

Debit cards use electronic transfer technology, enabling consumers to pay for retail purchases under a system known as a “point-of-sale transfer.” ATM cards can also be used in many of these transfers. Using a debit card is similar to using a credit card, except that the money for the purchase is transferred out of the buyer’s bank account to the store’s account soon after the transaction.

It is important to save the sales receipt from a debit card transaction. Consumers should immediately deduct purchases from one’s checkbook and note any fees. They should balance the account against a bank statement every month.

Some retailers and financial institutions may charge a fee each time an ATM card is used for purchases. Retailer fees should be displayed at the checkout counter. Fees charged by a financial institution must be disclosed at the time the card is received. The charges will also appear on a monthly checking account statement. Consumers should ask about fees before using an ATM card.

Unauthorized Transfers and Stolen ATM Cards

§ 15 U.S.C. § 1601 et seq.
§ 12 C.F.R. § 226.13
§ 12 C.F.R. § 205

Lost or stolen bank cards should be reported to the associated bank immediately. When notifying the banking institution within two (2) business days of learning of the loss, the consumer’s liability for unauthorized transfers is limited to fifty dollars ($50). The maximum liability can increase to five hundred dollars ($500) if the card issuer is not notified within the two (2) business day limit. Card holders may not be reimbursed for any unauthorized charges incurred after sixty (60) days of learning of the loss, if they do not notify the card issuer.

Computer or Clerical Errors

If it is believed that a bank has made a clerical error, that error should be reported immediately to a branch manager. Most errors can be cleared up through a simple phone call or a visit to the local branch. Some errors are more complex and are governed by federal statute. For example, the Fair Credit Billing Act⁶ governs computer and clerical errors involving bank loans and bank credit card transactions. Electronic fund transfers are also safeguarded by federal laws and regulations.⁷ If a bank refuses or cannot resolve the complaint, contact the appropriate regulatory agency as listed in the front of this chapter.

Office of the State Comptroller
Office of Unclaimed Funds
110 State Street
Albany, New York 12236

The Office of Unclaimed Funds can be reached at 1 800 221 9311 from within New York, or at (518) 270-2200 from outside the State.