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Subject: Overdraft Protection
Date: April 12, 2010
To: Chief Executive Officers and Compliance Officers of All National Banks, Department and Division Heads, and All Examining Personnel
Description: Opt-In Requirements and Related Marketing Issues
This bulletin is intended to provide guidance to national banks on implementation of a final rule establishing new opt-in requirements relating to overdraft protection programs. This bulletin transmits and summarizes the final rule.
This bulletin also reminds national banks that any marketing or supplementary materials associated with the opt-in procedures – or their overdraft protection programs generally – must comply with Federal Trade Commission Act (FTC Act) standards. Marketing must not be unfair or deceptive to consumers, and should provide consumers with timely, clear, accurate, and balanced information that will promote informed decision making.
On November 17, 2009, the Board of Governors of the Federal Reserve System (Board) published in the Federal Register a final rule (Rule) that amends Regulation E, 12 C.F.R. Part 205, to address overdraft protection programs.1 The Rule generally prohibits financial institutions from assessing fees for paying ATM and one-time debit card transactions that overdraw consumer accounts unless the consumer affirmatively consents, or opts in, to the overdraft protection program.2
Effective Date and Mandatory Compliance Dates
The Rule became effective on January 19, 2010. However, compliance does not become mandatory until July 1, 2010. The Rule applies to new and existing accounts. For accounts opened before July 1, 2010, financial institutions may not assess any overdraft fee on or after August 15, 2010, if the consumer has not opted in. For accounts opened on or after July 1, 2010, financial institutions may not assess any overdraft fee unless and until the consumer has opted in.
Scope of Rule
The Rule applies to overdraft protection programs in which the financial institution assesses a fee against a consumer’s account for paying an ATM or one-time debit card transaction when the consumer does not have sufficient available funds in the account to cover the transaction.3 However, the Rule does not apply to the payment of overdrafts pursuant to:
In addition, the notice and opt-in requirements of the Rule do not apply to an institution that has a policy and practice of declining to authorize and pay any ATM or one-time debit card transaction when it has a reasonable belief that the consumer does not have sufficient available funds to pay the transaction. However, even if the institution has such a policy and practice, it still may not assess a fee for paying ATM or one-time debit card transactions if the consumer has not opted in.4
Notice and Opt-In Requirements
Financial institutions may assess fees for paying ATM or one-time debit card transactions pursuant to an overdraft protection program if the following conditions are met:
If two or more consumers jointly hold an account, the consent or revocation of one consumer is treated as applying to the account, and will bind all holders of the account.
Form of Notice to Consumer
The notice must be substantially similar to a model form prescribed by the Board and included in Appendix A to the Rule. The notice must include the following information, and may not contain any other information that is not specified in or otherwise permitted by the Rule:
At the option of the financial institution, the notice may also include other information specified in the Rule, such as a description of any right to opt in to or opt out of the payment of overdrafts for other types of transactions (like check or ACH transactions).
Timing, Duration, and Revocation of Consent
The consumer may opt in at any time. Similarly, the consumer may at any time revoke the decision to opt in. The consumer’s consent continues until the consumer revokes it or the financial institution terminates the overdraft protection program.
Other Account Terms, Conditions, and Features
The financial institution must provide accounts with the same terms, conditions, and features to consumers who opt in and to consumers who do not opt in (other than the overdraft protection program for ATM and one-time debit card transactions). In addition, the institution may not condition the payment of other types of overdraft transactions (e.g., checks) on the consumer’s opting in to the payment of ATM and one-time debit card transactions pursuant to the overdraft protection program.
Additional Communications with Consumers
In the Supplementary Information to the Rule, the Board specifically acknowledged that institutions may provide additional information to customers about their overdraft protection programs – beyond the prescribed opt-in notice – so long as this information is set forth in a separate document.7
The OCC recognizes that national banks offering overdraft protection programs may wish to provide such additional information to their customers. Any such additional information should provide consumers with timely, clear, accurate, and balanced information that will promote informed decision making. Further, national banks must take steps to ensure that any such additional information is provided in a manner that does not constitute an unfair or deceptive practice within the meaning of the FTC Act.8
Accordingly, any such additional communications with consumers should not contain representations or omissions that are likely to mislead consumers about the consequences of opting in (or failing to opt in) or about the overdraft protection program in general. In particular, such communications should not contain misleading representations or omissions about:
For example, such additional communications should not suggest that the failure to opt in would affect check or recurring debit transactions; that, if the consumer fails to opt in, ATM and one-time debit card transactions may not be authorized and paid even if there are sufficient available funds in the consumer’s account; or that, if the consumer does not opt in, ATM and one-time debit card transactions that are declined would result in fees being charged to the consumer.
National banks also should carefully consider the compliance, reputation, and other risks that would be presented by targeting these additional communications to consumers that have previously used the overdraft protection program on more than an occasional, inadvertent basis. More generally, national banks should continue to take steps to conform their overdraft protection programs with the best practices set forth in the interagency Joint Guidance on Overdraft Protection Programs.9
Questions concerning this bulletin may be directed to the Community and Consumer Law Division at (202) 649-6350, the Compliance Policy Department at (202) 649-5470, or the appropriate supervisory office.
Ann F. Jaedicke
1 74 Fed. Reg. 59,033 (Nov. 17, 2009).