September 14, 1998
Robert S. Aljoe, Consultant
South Dakota Credit Union League
Post Office Box 0
500 Western Avenue North
Sioux Falls, South Dakota 57101
You have asked whether the South Dakota state law concerning fees
on returned checks is inconsistent with the federal Truth in Savings
Act disclosure requirements for credit unions. The requirements
of the South Dakota law you have referenced do not apply to credit
unions.
South Dakota law imposes disclosure requirements on merchants
and places of business who assess fees on customers for passing
returned checks. S.D. Codified Laws §57A-3-421. We consulted
the South Dakota Attorney General's Office about whether the terms
"merchants" or "places of business" include
credit unions and whether the disclosure requirements under section
57A-3-421 apply to credit unions. We were informed that the
Attorney General's Office does not consider credit unions to be
merchants or places of business subject to the disclosure requirements
under section 57A-3-421.
Federally insured state-chartered credit unions and federal credit
unions are subject to the federal Truth in Savings Act of 1991,
12 U.S.C. §4301 et seq., and the NCUA regulations
implementing the Act, 12 C.F.R. Part 707. We have answered your
three specific questions below in light of the NCUA Truth in Savings
regulations.
1. Do credit unions in South Dakota have to disclose return item
fees on their share and share draft statements to members?
No, they do not unless they have imposed the fees during the statement
period.
The NCUA regulations state that credit unions must disclose fees
associated with checks returned unpaid. 12 C.F.R. §707.4(b)(4).
These disclosures must be made before an account is opened or
a service is provided, whichever is earlier. 12 C.F.R. §707.4(a)(1).
The NCUA regulations also state that if a credit union mails
or delivers a statement, the statement must include certain disclosures,
including disclosure of the fees associated with checks returned
unpaid and imposed on the account during the statement period.
The fees must be itemized by type and dollar amount. 12 C.F.R.
§707.6(b)(3).
2. Do credit unions in South Dakota have to post a notice in their
lobbies to alert members up front that they will be assessed a
fee for bad checks?
No, NCUA regulations do not require credit unions to post such
a notice in their lobbies.
3. If the credit union wishes to turn over the bad check to the
State's Attorney for prosecution in the South Dakota court system,
would the credit union have to follow South Dakota law even if
the NCUA determined that credit unions were preempted from the
South Dakota disclosure requirements?
No. As noted above, the South Dakota disclosure law concerning
fees on returned checks does not apply to credit unions. However,
in the event of a prosecution, there may be other state laws that
would be involved. We suggest you consult with local counsel.
Sincerely,
Sheila A. Albin
Associate General Counsel
GC/RM:bhs
SSIC 3324
98-0433