Nevada Administrative Code Chapter 668 - Banks: Prohibited Practices and Penalties
Overview of NAC Chapter 668
Chapter 668 regulates the conduct of banks and banking institutions in Nevada, focusing on:
Prohibited practices (what banks cannot do)
Penalties for violations
Enforcement authority of the Nevada Division of Financial Institutions (DFI)
It is meant to protect consumers, maintain financial stability, and ensure ethical banking practices.
Case 1: Misrepresentation of Loan Terms
Scenario
A bank offers personal loans but does not clearly disclose the APR, late fees, or prepayment penalties in writing.
NAC 668 Requirement
Full disclosure of terms and fees before executing any loan agreement.
Avoiding any false or misleading statements to customers.
What Happens
A customer files a complaint with the DFI.
Investigation confirms that loan documents omit key terms.
Result
Bank is ordered to correct disclosures.
Fined for misleading practices.
Required to notify affected customers and provide remedies.
Key Principle
Transparency is mandatory; banks cannot hide fees or misrepresent loan conditions.
Case 2: Excessive or Unauthorized Fees
Scenario
A bank charges a $50 monthly fee for account maintenance without proper disclosure or customer consent.
NAC 668 Requirement
Banks must only charge authorized fees clearly communicated to customers.
Unauthorized fees are prohibited.
What Happens
Several account holders complain.
DFI audits account statements and finds the fee is applied to all customers, not just specific accounts.
Result
Bank is fined.
Required to refund all improper fees.
Must implement new internal controls to prevent recurrence.
Key Principle
NAC 668 protects consumers from hidden or unauthorized charges.
Case 3: Conflicts of Interest in Lending
Scenario
A bank officer approves loans to a company owned by a relative, without disclosure or recusal.
NAC 668 Requirement
Bank employees and officers must avoid conflicts of interest.
Transactions with related parties must be disclosed and approved by the board.
What Happens
Audit uncovers the relative’s loan was approved without proper oversight.
Result
Officer is disciplined or removed.
Bank is fined for noncompliance.
Required to implement conflict-of-interest policies.
Key Principle
Protects both the bank’s integrity and the fairness of lending practices.
Case 4: Fraudulent Account Activity
Scenario
A teller alters customer records to cover up embezzlement.
NAC 668 Requirement
Banks must maintain accurate records and prevent fraudulent activity.
Internal controls must detect unauthorized transactions.
What Happens
Investigation reveals a series of missing funds traced to the teller.
Result
Teller is terminated and prosecuted.
Bank pays fines and strengthens internal controls.
Customers affected by missing funds are reimbursed.
Key Principle
Banks are accountable for both internal and external fraud, and NAC 668 allows enforcement actions to protect customers.
Case 5: Discrimination in Lending
Scenario
A bank consistently denies mortgage applications to applicants from a certain neighborhood or ethnic group.
NAC 668 Requirement
Prohibits unfair discrimination in lending practices.
Lending decisions must be based solely on creditworthiness and objective criteria.
What Happens
Complaints are filed with DFI.
Investigation shows patterns of discriminatory denials.
Result
Bank is fined and required to implement fair lending policies.
Corrective measures include staff training and monitoring for compliance.
Key Principle
NAC 668 enforces equity and nondiscrimination in banking services.
Case 6: Improper Advertising
Scenario
A bank advertises “no fees for checking accounts,” but charges customers a $15 hidden fee for paper statements.
NAC 668 Requirement
Advertising must be truthful and non-misleading.
What Happens
Customers report the discrepancy.
DFI finds advertising violates NAC 668.
Result
Bank must cease misleading advertising immediately.
Refund customers affected by the hidden fees.
Pay administrative fines.
Key Principle
Protects consumers from false or deceptive marketing.
Case 7: Failure to Maintain Required Records
Scenario
A bank closes a branch and destroys loan records prematurely, violating retention rules.
NAC 668 Requirement
Banks must retain records for a specified period (loans, deposits, compliance documents).
What Happens
During an audit, DFI cannot verify compliance or investigate complaints due to missing records.
Result
Bank is fined.
Required to implement a records retention policy.
May face additional penalties if missing records prevent enforcement actions.
Key Principle
Proper record-keeping ensures transparency, accountability, and regulatory compliance.
Case 8: Unsafe Banking Practices
Scenario
A bank invests heavily in high-risk assets without proper risk assessment or board approval.
NAC 668 Requirement
Banks must conduct safe and sound banking operations.
Risk management policies must be followed.
What Happens
Economic downturn leads to losses threatening depositors.
Result
DFI orders the bank to reduce risk exposure.
Fines and corrective action plans are imposed.
Board may be replaced if governance fails.
Key Principle
NAC 668 ensures financial stability and depositor protection.
Summary of Key Themes in NAC Chapter 668 Cases
Consumer protection – proper disclosure, no hidden fees.
Integrity of banking operations – avoiding fraud, conflicts of interest, discrimination.
Compliance and accountability – record-keeping, reporting, and adherence to regulations.
Safe and sound practices – risk management, honest advertising, responsible lending.
Penalties – fines, corrective action, staff discipline, revocation of banking licenses in extreme cases.
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