I don't believe you can charge an OD fee due to a debit hold that results from a one-time debit card transactions.

Having said that, I do believe that if a check, recurring debit or other ACH debit comes in and the account has an insufficient balance due to the debit hold, you can charge the NSF or OD fee on the non-debit card/non-ATM item.

Princess Rooney,

I think I am need of some clarification. You are seperating out a bank with a "program" vs a bank with "no program". When I see the word "program" I think of an overdraft pay feature is that is promoted. I do not recall where the regulation makes a distinciton between the two. The definition of overdraft services is provided in the regulation and it states:

Overdraft Service:
Means a service under which a financial institution assesses a fee or charge on a consumer’s account held by the institution for paying a transaction (including a check or other item) when the consumer has insufficient or unavailable funds in the account.
The term “overdraft service” does not include:
(1) A line of credit subject to the Federal Reserve Board’s Regulation Z (12 CFR part 226), including transfers from a credit card account, home equity line of credit, or overdraft line of credit;
(2) A service that transfers funds from another account held individually or jointly by a consumer, such as a savings account; or
(3) A line of credit or other transaction exempt from the Federal Reserve Board’s Regulation Z (12 CFR part 226 pursuant to 12 226.3(d).

Majority of the banks charge overdraft fees (I say majority, because there is an eception somewhere (Policy for ATM & one time debits...LOL). So therefore the new opt-in requirements appy to all, not just those banks who have a "program". If it was the case where the requirements did not apply to banks with out a program then the 2nd and 3rd bullet points would be a mute issue.

Your thoughts would be greatly appreciated.

Thanks!

I was attempting to clarify the snaafu regarding banks that routinely charge OD fees (i.e. they have a Courtsey Pay Program, ODP Program or whatever you want to call it) vs. those that have a manual review process for paying items and do not routinely pay one-time debit card and ATM Withdrawals if there are insufficient funds.

For purposes of the "Opt-in" requirement, it doesn't matter if your bank "advertised" the program or not. Frankly, the distinction between institutions that "advertised" or "actively promoted" the Courtesy Pay program has basically been eliminated now that we all have to show monthly and year-to-date OD and NSF fees on statements.

The Fed had stated that a Bank that does not routinely pay overdrafts on one-time debit card and ATM withdrawals were not subject to the requirements, and everyone thought that meant they did not have to send the opt-out and they could still charge a fee for those inadvertent OD's when the account had sufficient funds at time of authorization.

Turns out, for those banks that don't routinely pay overdrafts still can't charge a fee, but they don't have to send out the Opt-In since there is no program to Opt into.

I am hesitant to post this but here goes: If you have an account that has a ACH transaction, 2 checks and 1 ATM transaction hit the account on the same day, what caused the overdraft? Can you charge the account for the overdraft per the new Reg. change? I must be missing something but I don't know how you determine if the ACH, checks or the ATM transaction caused the account to be overdrawn.

I realized that you were looking at the wrong section of the regulation. My distinction was based on this item:


§ 205.17 Requirements for overdraft services.
(b) Opt-in requirement.
(4) Exception to the notice and opt-in requirements. The requirements of § 205.17(b)(1) 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 transactions when the institution has a reasonable belief at the time of the authorization request that the consumer does not have sufficient funds available to cover the transaction. Financial institutions may apply this exception on an account-by-account basis.

I believe this was discussed earlier in the thread. I believe each institution will need to establish a "posting" order for items and pay debit card transactions before ACH and checks. You will need to do this consistently.

Thanks, for the response. It was how i was interpreting your post. I believe we are on the same page. Just explaining it differently. I also noted the exception in my previous post. Thanks

Could someone give me a little more clarification on what the Fed is meaning by "one time debit card transaction"?

Thanks

One-time as opposed to recurring.

One time: You swipe your debit card to buy that non-fat double shot mocha latte.

Recurring: You (in a moment of insanity) give your debit card number to the fitness gym so you could get the first 3 months for only $9.00 (not that you're any more likely to go to the gym anyways) and they'll happily zap your card for $20.00 a month after the first 3 months from now until the sun goes nova (or you close your account.)

Thanks Freak & Princess!

Is changing our posting order something that is required to be disclosed to our customers?

I apologize if this has already been asked and answered, but does anyone know if both owners of a joint account would have to opt in or if one could opt in for the account?

I recently reviewed the Fed's Outlook Live podcast from December 10th, which I recommend to anyone who hasn't already done so. The link is:

http://www.philadelphiafed.org/podcasts/player-outlook.cfm?file=outlook-live%2Foutlooklive_1209.mp3&title=Outlook%20Live%20Conference%20Call

There is one exchange that amazes me. At around the 29:10 mark, a banker asks a question about charging fees for inadvertent overdrafts that might occur even in a "return and charge" environment. The regulator's response was "we did not contemplate" this scenario.

Later in the call, the regulator acknowledges that, loosely paraphrased, "bankers deal with imperfect information all the time", and that "this is another one of those instances". She is correct. We do regularly deal with imperfect information. Imperfect information introduces risk, and the key way we deal with risk is with PRICE. So, in essence, when the price mechanism is no longer available (that is, we cannot charge for the inadvertent overdraft), our reaction will be to withdraw the service (the debit card) since we can no longer price according to level of risk. So potential customers are more apt to get a re-loadable stored value card from Wal-Mart than deal with a bank. And the banking industry becomes even more irrelevant.

I found my own answer - any one owner can opt in and any one owner can subsequently revoke the opt-in.

I think you may be overreacting a bit. The only customers a bank might need to pull a card away from are those that don't opt in and more than occasionally force the bank to pay an OD card transaction. The vast majority of bank customers, who don't overdraw their accounts, should still be able to have their debit card access.

It's always a mistake to make sweeping statements or sweeping decisions that affect a whole group when only a few cause the troubles. It's a mistake when regulators and Congress punish an entire industry for the sins of the few, and it's also a mistake, I think, to pull the plug on a product based on losses caused by a few errant customers.

What about the bookkeeper who sits behind the desk and decides what to pay and what not to pay..... Will that depend on the posting order?

Thanks John for your reasoned reply. While I didn't state it in my earlier post, I was thinking within the context of offering a "second chance" account, where the risk level is somewhat higher than the average DDA, but where we also see significant value in furnishing debit cards as part of the account. Unless we can mitigate the inherent added risk, convincing banks to offer debit cards to these customers will be a tougher sell now.

All of this hullabaloo makes me wonder - what all did we do BEFORE we started charging OD fees on debit cards? It really wasn't all that long ago.

I'm beginning to think that these OD fees on debit cards were like crack - to both banks and customers that grew dependent on them.

Banks (and I must include Credit Unions here) loved, loved, loved the increased fee income with no apparent thought about how sustainable it was. Fee income from Overdrafts AND interchange. Sweet!

And careless customers just living in the moment loved, loved, loved that they could pull out a piece of plastic and buy whatever tempting item-du-jour was inexorably calling that siren call to BUY ME NOW!!!! and not worry about paying for it later. Again, no apparent thought (or care) about sustainability.

So now the Gubmint has stepped in with a JUST SAY NO program to financial crack and the cries of withdrawal are starting. Wait until consumers start having their debit cards reject at Walmart or the movie theater. The anguish will no doubt be blogged far into the night.

Sorry - it's late and I just spent a week slogging through recent mortgage files looking for ETILs and subsequent ETILS along with all of the other mass mess of documents that pile up in a mortgage file that has been assembled and re-assembled according to whatever investor is buying the darn thing - and of course the order of paperwork makes no logical sense - well not to me at least. Who puts the final TIL at the bottom of the file and the GFE 3 pages down from the top..... and the entire file measures a good four to six inches thick?

The crack analogy is making me wonder - will those new medical MJ clinics be accepting debit cards???? Would their patrons opt-in to OD fees?

Night all!

One result of the new rule is that banks will be pressured to make certain that their posting order takes non-returnable items (ATM, POS, cashed-out on-us checks, etc.) first, and in-clearing checks and ACH debits will be last. There's still no dictum from Washington on the order of payment of checks, but you can bet there will be if banks keep shifting to largest first order.

Begining 7-1-10, we will not be able to charge fees for NSFs unless the account opted in. For most customers NSFs are rare especially for POS transactions. To find out how big a problem you might be facing or how many customers have been NSF due to POS transactions, get a download of customers that have had NSFs in excess of 3 or 4 during 2009 due to a POS transaction without funds in other accounts (CIF). Once you find those customers then move them to ATM cards from debit cards. That will leave customers who go NSF rarely or have compensating balances for your right of set off if they do not cover the NSF.

How do you move them to ATM cards? Hot card the debit card due to scamming or skimming, and offer ATM card until problem (scamming skimming) cleared up would be one option.

If you do not get an opt-in and you have no more monies in the linked account , can you charge OD fee? What I heard from the FED Seminar, you cannot charge an OD fee if no opt-in is received in this case.

That's what I heard from the Fed seminar, too. If the transaction that exceeds the available funds in the linked account or LOC is a one-time debit card or ATM transaction and the customer has not opted in, no fee can be charged.

I cannot recommend taking such action as a preventive action unless you have actual experience after 7/1 with a customer's overdrafts through POS. And then I would not recommend using a trumped-up excuse like skimming. I'd be up front and say it's due to account mishandling, triggering overdrafts (that the customer did not want you to approve anyhow).

Does anyone know where I can get a copy of the slides from this presentation?