Overdraft and NSF Fee Refund Rules for Re-presentment and APSN Disputes

For decades, banking fees for insufficient funds were treated as a simple penalty for bad math: if you spent more than you had, you paid a price. However, the landscape has shifted dramatically. Federal regulators and the Connecticut Department of Banking now scrutinize what are termed “junk fees”—charges that serve no purpose other than revenue generation, often triggered by automated systems designed to fail the consumer. Specifically, practices like charging multiple fees for the same rejected transaction (re-presentment) or manipulating transaction timing (Authorize Positive, Settle Negative) are now viewed as potential violations of consumer protection laws.

The challenge for Connecticut depositors is that banks rarely volunteer these refunds. A customer calling to complain about “hardship” is often offered a one-time courtesy waiver of $35. In contrast, a customer who submits a written dispute citing specific unfair practices and regulatory guidance is auditing the bank’s compliance. This shift from asking for a favor to demanding a correction is the only consistent way to recover hundreds or thousands of dollars in accumulated fees.

This article outlines the specific audit techniques required to identify recoverable fees. It details the difference between legitimate penalties and “junk” charges, the escalation path through Connecticut regulatory bodies, and the specific language needed to trigger an executive review of your account history.

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Last updated: October 26, 2023.

Quick definition: The strategic process of disputing Overdraft (OD) and Non-Sufficient Funds (NSF) fees based on unfair processing practices (UDAAP) rather than financial hardship.

Who it applies to: Connecticut consumers who have experienced “fee stacking,” fees on debit swipes despite opting out, or fees triggered by posting order manipulation.

Time, cost, and documents:

• Cost: $0. You are disputing internal errors; there is no filing fee unless you go to Small Claims.
• Lookback Period: Typically 12 months for standard disputes; up to 6 years for systemic breach of contract in CT.
• Documents: PDF bank statements (last 12-24 months), the Deposit Account Agreement (contract), and a spreadsheet listing contested fees.

Key takeaways that usually decide disputes:

• Banks settle “Re-presentment” claims (multiple fees for one item) to avoid regulatory scrutiny.
• Evidence of “APSN” (Authorize Positive, Settle Negative) is a strong indicator of unfair practice.
• Filing a complaint with the Connecticut Department of Banking forces a formal response from the institution.

Quick guide to fee disputes in Connecticut

• Identify the “Junk”: Not all fees are illegal. Focus on “Re-presentment” (same item charged twice) and “Surprise Overdrafts” (where the balance was positive at the time of purchase).
• Stop Asking, Start Auditing: Do not call and ask for a favor. Write a letter listing specific dates, amounts, and the reason the fee is invalid (e.g., “Duplicative fee for a single item”).
• Leverage the “Opt-In”: If you never signed the Regulation E “Opt-In” form for ATM/Debit overdrafts, every single overdraft fee on a debit card swipe is illegal and must be refunded.
• Bypass the Branch: Tellers cannot rewrite bank policy. Send your dispute to the “Compliance Department” or “Executive Office” listed in your account agreement.
• State Backup: If the bank denies you, the Connecticut Department of Banking is responsive to complaints regarding “unfair or deceptive acts.”

Understanding junk fee mechanics in practice

To successfully dispute fees, one must understand the mechanics of how they are assessed. The most common “junk fee” is the **NSF Re-presentment Fee**. This occurs when a merchant tries to cash a check or process an ACH payment, and it bounces. The bank charges you $35. The merchant, seeing the failure, tries again two days later. It bounces again. The bank charges another $35. To the banking system, these are two “events.” To the regulator and the consumer, this is one “item” being penalized twice.

The FDIC and CFPB have issued guidance stating that contracts allowing “fees per item” are ambiguous if they do not explicitly define that a “retry” counts as a new item. In Connecticut, ambiguous contracts are construed against the drafter (the bank). Therefore, charging multiple fees for a single failed payment is a primary target for refund demands.

Another major category is **APSN (Authorize Positive, Settle Negative)**. This happens when you have $100 in your account, swipe your card for $50 (authorized), but the transaction settles three days later. In the meantime, a check clears, dropping your balance to $0. When the $50 charge finally posts, the bank hits you with an overdraft fee, even though you had the money when you bought the item. Regulators have flagged this as “counter-intuitive” and unfair, as consumers cannot reasonably predict the fee.

Legal and practical angles that change the outcome

The governing document in these disputes is the “Deposit Account Agreement.” Most consumers never read it, but it contains the definitions of “item,” “posting order,” and “overdraft limits.” If the bank’s practice deviates from its written policy—for example, if the policy says they process checks “low to high” but they processed “high to low” to drain the account faster—that is a breach of contract.

In Connecticut, the Connecticut Unfair Trade Practices Act (CUTPA) prohibits unfair or deceptive acts in the conduct of trade or commerce. While banking is federally regulated, state-chartered banks in CT are sensitive to CUTPA claims. Arguments that frame fee stacking as “deceptive” because a consumer cannot reasonably avoid the fee are powerful in this jurisdiction.

Workable paths parties actually use to resolve this

The most successful path involves “bulk” disputes. Instead of disputing one $35 fee, the consumer audits the last two years, finds $400 in re-presentment fees, and submits a single spreadsheet. This signals to the bank that the consumer is sophisticated. The bank often calculates that the cost of manually investigating 12 different fees exceeds the cost of just refunding them, leading to a “business decision” refund.

Practical application of fee audits

You cannot simply claim “the fees are too high.” You must be specific about why the fees were wrongly assessed under modern regulatory standards.

1. Download 24 Months of History: Export your transactions to a spreadsheet (CSV) or print PDF statements.
2. Filter for Fees: Highlight every line item labeled “NSF Fee,” “Overdraft Item Fee,” or “Insufficient Funds.”
3. Identify Re-presentments: Look for the transaction causing the fee. If you see the same Merchant Name and Amount (e.g., “GYM MEMBERSHIP $29.99”) appear twice within a few days, each triggering a fee, mark the 2nd and 3rd fees as “Re-presentment Junk Fees.”
4. Identify APSN: Look for Debit Card overdrafts. Check your running balance on the date of the transaction (not the posting date). If it was positive when you swiped, mark it as “APSN Junk Fee.”
5. Draft the Dispute Letter: “I am disputing the following fees totaling $[AMOUNT] charged between [DATE] and [DATE]. These fees represent re-presentment of the same item/APSN practices, which regulators have deemed unfair. Please refund these amounts.”
6. Submit and Escalate: Upload via the bank’s secure message center. If ignored for 10 days, file a complaint with the CFPB.

Technical details and relevant updates

The FDIC Supervisory Guidance (FIL-40-2022) explicitly states that re-presentment fees may result in “substantial consumer harm” and that disclosure alone may not be sufficient to avoid UDAAP liability. This means even if the bank’s fine print says they can charge you twice, federal regulators argue it might still be illegal because it is essentially unavoidable for the consumer.

For Connecticut State-Chartered banks, the Department of Banking monitors compliance with state usury and consumer protection laws. While overdraft fees are not technically “interest” (and thus exempt from usury caps), the “stacking” of fees can be viewed as an abusive practice. Additionally, Regulation E (12 CFR 1005.17) mandates that no overdraft fees can be charged on ATM/one-time debit transactions without affirmative opt-in. Banks frequently fail to produce the signed opt-in form when challenged.

• Daily Caps: Most banks now cap fees at 3-5 per day. Ensure you weren’t charged more than the daily maximum listed in your contract.
• De Minimis Buffer: Many banks will not charge if the account is overdrawn by less than $5. Check for fees triggered by small balances.
• Continuous Overdraft Fees: Some banks charge a fee every 5 days the account remains negative. These are highly contestable as “abusive” if the original negativity was caused by junk fees.

Statistics and scenario reads

The industry is moving away from NSF fees due to regulatory pressure, but overdraft fees remain a massive revenue source. Understanding the trends helps leverage your dispute.

Fee Recovery Probability
Re-presentment (Same Item): 80%
Debit Card (No Opt-In): 95%
APSN (Authorize Positive): 60%
Standard Overdraft (Courtesy Pay): 20%
Technical violations (Re-presentment/Opt-in) have much higher success rates than “courtesy” requests.

Escalation Impact
Branch/Call Center Limit: ~$50 – $100 waiver
Executive Office Authority: Unlimited (often full refund of disputed amount)
Regulatory Complaint Response Time: 15 – 60 days
Filing a complaint is often the only way to bypass the low waiver caps of frontline staff.

Key Monitoring Metrics
Statute of Limitations (Contract): 6 Years (CT)
Regulation E Dispute Window: 60 Days (Strict)
Bank Response Window: 10 Business Days (Standard)

Practical examples of fee escalation

Common mistakes in fee disputes

FAQ about Overdraft/NSF Refunds

References and next steps

• Audit Statements: Review the last 12-24 months specifically for repeated fees on the same amount.
• Download Contract: Find your “Deposit Account Agreement” and search for “re-presentment” or “retry.”
• Write the Letter: Draft a “Notice of Error” citing UDAAP and specific fee dates.
• Escalate: If denied, file with the CT Department of Banking and the CFPB.

Related reading:

• Banking Finance & Credit
• Understanding Regulation E Rights
• How to File a CFPB Complaint
• Connecticut Consumer Protection Laws

Normative and case-law basis

The legal leverage for these disputes comes from a combination of the Electronic Fund Transfer Act (Regulation E) and the prohibitions against Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) under the Dodd-Frank Act. The CFPB Circular 2022-06 specifically addresses “Unanticipated Overdraft Fee Assessment Practices” (APSN), classifying them as likely unfair. Similarly, FDIC FIL-40-2022 warns institutions about the risks of re-presentment fees.

In Connecticut, the Department of Banking enforces state banking laws, and the Connecticut Unfair Trade Practices Act (CUTPA) (C.G.S. § 42-110b) provides a broad state-level mechanism to challenge deceptive business practices, often mirroring federal UDAAP standards but applying them within the state’s jurisdiction.

Final considerations

Recovering “junk fees” is an exercise in persistence and precision. Banks rely on the fact that the vast majority of consumers will accept a “no” from a customer service representative. However, when a consumer presents a dispute grounded in the technical definitions of “re-presentment” and “APSN,” the bank’s calculus changes. The cost of non-compliance (regulatory fines) is far higher than the cost of your refund.

By auditing your statements and using the correct terminology, you move your request from the “help desk” to the “compliance desk.” In the current regulatory environment, that is where refunds are approved.

This content is for informational purposes only and does not replace individualized legal analysis by a licensed attorney or qualified professional.