10-RA-12 / August 2010
Member Notice Requirements for Overdraft Services
Federally Insured Credit Unions
Dear Board of Directors,
Effective August 15, 2010, financial institutions are prohibited from charging consumers fees for paying overdrafts on automated teller machine (ATM) transactions and one-time debit card transactions – unless consumers “opt in” to overdraft services for those types of transactions. Your credit union’s overdraft program must comply with these changes.
To assist you in this process, NCUA has posted the Federal Reserve Board’s sample opt-in notice: What You Need to Know about Overdrafts and Overdraft Fees.
The Fed’s easy-to-understand notice was created to raise consumers’ awareness of overdraft fees, as well as options available to reduce those fees. The sample notice is available online through the following link:http://www.federalreserve.gov/consumerinfo/wyntk_overdraft.htm (opens new window).
While credit unions are not required to use this sample notice, it is a convenient way to provide the required notice to members.
The Fed’s recent changes to Regulation E enable consumers to limit the costs of overdraft services by providing consumers and financial institutions with several choices:
- Consumer Opt In – As highlighted above, this provision requires that consumers opt in, or affirmatively consent, to the institution’s overdraft service for ATM and one-time debit card transactions, before overdraft fees may be assessed on an account.
- Opt-in/Out Notice – Prior to opting in, a consumer must be provided a notice explaining the financial institution’s overdraft services. This should include the fees associated with the service and the consumer’s choices. If institutions do not use the Fed’s sample notice, Regulation E includes language that the notice should substantially follow.
- Consumers Covered – The opt-in right applies to all consumers, including new and existing account holders.
- Revocation Option – Consumers also have an ongoing right to revoke consent after they opt in.
- Same Account Terms, Conditions and Features – Institutions must provide consumers who do not opt in with the same account terms, conditions and features -- including prices -- as consumers who do opt in.
- Prohibition from Charging Overdraft Fees for Overdrafts Paid – Institutions are prohibited from charging overdraft fees for any overdrafts they pay on ATM and one-time debit card transactions for consumers who do not opt in.
- Mandatory Compliance Dates: July 1, 2010 – for new accounts opened after July 1, 2010
August 15, 2010 – for accounts existing before July 1, 2010
The final rule and recent clarifying amendments are available through the following links:
Amendments Clarifying the Final Rule: http://edocket.access.gpo.gov/2010/pdf/2010-13280.pdf (opens new window)
If you have any questions regarding this Regulatory Alert, please contact your district examiner, regional office, or state supervisory authority.