I understand that Payroll cards would also be included in the 'opt-in' requirements if they assess an overdraft fee, is that correct?

You've been reading ahead, haven't you, tyond?

Yes, that is correct.

So rather than going through the process of sending "Opt-Ins" to customers, if a bank decided it simply would reject these transactions and not charge a fee, it looks like they will need to send a "Change In Terms" notice under TISA to exclude those transactions from the type that can incur an OD or NSF Fee.

What fun.

You betcha, Princess. It would be an interesting argument -- would discontinuing the application of OD fees to ATM and debit card transactions be a change that would "adversely affect the customer"? Not an argument I'd want to participate in. I'd say send the notice.

I totally agree. We have several customers that we took away their Overdraft limit completely either by request or by bank decision, but the accounts still go negative when the Pre-Authorized Hold doesn't complete within the three day period and we are forced to draw the account negative anyway.

I recently had a transaction that was debited almost two months after the preauthorization came through. There is no way to return the item like you can a check so you have to either A: Post the transaction to the account or B: Dispute and Pray (As my staff likes to say, looking at the number of rejected disputes from MasterCard with no additional chargeback rights, all he said she said and in the end the bank is held holding the loss).

The card networks continue to work with 20th-century procedures. Yet I can take my card to the local grocery and use a PIN to pay, and the debit posts in the same time it would take an ATM withdrawal to hit the account. It's time for the big networks to modernize. It won't be long before it will take less time for my check to Merchant A to clear before my (signature) debit card payment to the same merchant.

Well, that's a little bit of good news at least.

Until today, I did not know anything about "decoupled debit cards." Could a bank outsource their debit cards to one of these issuers to avaide the new OD requirements? If possible, what are some of the pros and cons of considering this?

Here is my favorite line from the final rule:

“Due to various factors such as consumer inertia and the difficulty in anticipating future costs, consumers may end up with suboptimal outcomes even when given a choice. As some studies have suggested, consumers are likely to adhere to the established default rule, that is, the outcome that would apply if the consumer takes no action.”


I actually laughed outloud when I read that. So...not only are people to lazy to balance their checkbooks but also to call the bank to opt out? And that's the main reason for adopting the opt in stance? Wow....just, wow.

That's great! I think examiners are just acknowledging that folks don't read the stuff we send them! The opt-out is clearly stated in our welcome letter.

We are one of the 24% of banks that do not offer a courtesy pay overdraft system. However, because we are not on a real time system (yet) a customer can make a withdrawal from the ATM, checks clear off the account during the day, so when we post the ATM transactions that night, there are not enough funds to pay the ATM transaction and it rejects. We manually pay the item into overdraft and charge the customer an overdraft fee. Then if the overdraft is not covered within 5 days, we automatically charge the customer an amount daily for being overdrawn. I am thinking under the new rules, the fee for paying the ATM withdrawal into overdraft cannot be charged AND the daily fee for the account being overdrawn can not be charged if the only thing that made the account go overdrawn was the paid ATM withdrawal.

Do you agree with my conclusions?

I agree that they could not be charged any fees for the overdraft, unless they have chosen to opt-in.

There is an exception that states, "If a bank's policy is not to pay or allow ATM withdrawals or one-time debit card transactions if, at the time authorization is requested, the bank has a reasonable belief that the account has insufficient funds, then the notice and opt-in requirement do not apply."

Is anyone considering or already have this policy?

HappyGilmore, haven't you heard.... only bank's have to be accountable.

Harvey, maybe you need to check your posting priority on your system. We have the same thing that happens, however, we post ATM withdrawals first, then any checks that might come in. Then if funds are not there, check can be returned without creating overdraft.

Good suggestion, GP.

Harvey: Maybe by checks clearing during the day, you mean checks cashed at the bank vs. inclearings? You want your posting order to be something like: 1) deposits; 2) on us debits; 3) force pay items; 4) electronic debit items; and finally 5) inclearing checks.

The banks that will really be disadvantaged are those that approve card transactions using an offline positive balance file and don't even know about them until they are posted.

I've aleady been asked the question - "Can we just include the Opt-In as part of the Account Agreement?"

**sigh**

Princess,

Give the person that asked you the question the 93 page document and tell them to read it and let YOU know if it can be part of the Deposit Agreement. Ha!!

The answer? On page 35 of the document, and in section 205.17(d) of the rule.

The disclosures must be segregated from other information not required or permitted to be included. The method for providing consent must be separate from other types of consents.

I will be slicing and dicing all of the provisions of the new rule in a January 6, 2010, webinar, "Overdrafts - New ATM and Debit Card Rules."

Yeah - I already told them "No" unless they want to include the entire Model Form as part of their Account Agreement.

Just waiting to hear whether or not I'm still a "Team Player."

This project has been assigned to me and it's already frustrating me. Not due to anything at the bank, but due to all the scenarios that I am coming up with in which the customers can continue to not pay attention and get their transactions covered without fees.

Don't get me wrong - I do agree with the pp in that too many banks charged too many fees and too many people were charged insane amounts of money for overdrawing their accounts for piddly transactions. BUT - there has to be some accountability left on consumers.

I'm working for a large institution now that has the means to update systems, etc., but my thoughts keep returning to my previous employers - small community banks that will end up getting the raw end of the deal on this one.

My proposed solution for instances where the card transaction posts after the initial balance has been depleted is:

1. If balance is depleted due to paper check transaction(s), return the checks as NSF and charge NSF fee(s) for each. Then post the card transactions.
2. If balance is depleted due to ACH debit(s), if we're within the timeframes to return it NSF, return it and charge NSF fee(s). If past the time deadline for returns, post all transactions, charge only for ACH.
3. If balance is depleted due to card purchases caused by merchant settlement delays, post all (obviously) without charging fees.

However, for any instance where we are forced to pay the OD without charging fees, I am proposing that we set a limit of 5 occurrences (or whatever number we settle on). This would be added to the account T&Cs and all appropriate disclosures. Upon the 4th occurrence, we send a notice to the customer letting them know that an additional overdraft created by an ATM or one-time debit card transaction will result in us closing their debit card and issuing an ATM card only. That way they can only do PIN-based transactions, which will post in real-time. If they want to keep the check card, they will (after the 5th occurrence) have to set up overdraft protection by either linking a savings account or applying for our OD line of credit we provide.

Anything blatantly wrong with my proposal? I have read the entire new rule numerous times and I don't see anything that would prohibit me from proposing such a solution (i.e. revoking check card privileges and switching to ATM card only).

I think the push-back you may get is that the bank/CU still makes more money from the interchange fee on Signature transactions as opposed to PIN-based transactions.

In the end, banks/CUs will have to conduct a cost/benefit analysis of cutting off debit cards to reduce "free" overdrafts vs. the income they will lose from the interchange.

We have always had this policy.

We don't allow these types of overdrafts to occur and then charge for them...no bounce program here because we didn't believe it 'helped' the customer. Other banks laughed at us because we were not 'capitalizing on the fee income'.

Now, I'm thinking this exception is too good to be true.

Does this mean that we can still charge if they are overdrawn when the debit transaction clears providing we acted in good faith and there were sufficient funds in their account when the transaction was authorized??? Without an opt-in? (exception is on bottom of page 80)

I agree. Plus, the more I think about it, my example of "5" is really low (which is why it was just an example, LOL). We'll have to decide on a lot of parameters to consider it - such as the amount of ODs, etc. I wouldn't want to cut off a customer's check card for overdrawing it $1.57 a few times. I might if they repeatedly overdraw it though for $157. I do think we have to do something though, because otherwise some people will really abuse it. A lot of people do take the time to educate themselves on bank laws if they know it can benefit them. So I think we should place some kind of a program in place to stop the "abusers".