Question: Checks are not the only transactions covered in most (discretionary) Overdraft Payment Programs. Do the same rules apply under the new Guidance and Regulation DD Amendments for other types of transactions?
Answer: The Final Guidance governing Overdraft Payment Programs (ODP) has been issued and the amendments to Regulation DD will be enforced effective July 1, 2006; finalizing the regulatory framework under which these programs must be structured and administered. When these programs began to take shape over a decade ago, they were primarily administered through the customer's checking account. Most programs today, however, are more broad-based in the scope of the transactions they cover. It's common for discretionary overdraft services to now extend to ATM withdrawals and transfers, debit card transactions, and preauthorized automatic debits, as well as telephone initiated or "other electronic means".
Regardless of the transaction type, it must be made clear, or disclosed, to the customer all of the types of transactions that fall under (discretionary) Overdraft Protection. These transactions are, in fact, governed by the same rules and regulations as a standard checking account transaction. This means your institution must disclose the "access points" that may cause customers to incur overdraft fees whether you pay or return unpaid their NSF transactions. Alert customers before a transaction triggers an overdraft by providing notice, where feasible, that the withdrawal may result in ODP fees. This can be done through ATM signage as well as teller notification. And always try to distinguish balances from overdraft payment funds availability to avoid customer confusion.
It's advisable to manage your overdraft service "as if" it were a formal line of business. Train and retrain your management and staff to update their understanding of the program, potential changes and regulatory compliance so they can disclose the proper information to customers. Lastly, it's a good idea to work with your operations and technology staffs to streamline your overdraft process so many of these disclosure requirements for the various transactions are "built in" to your operating systems and procedures.
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