So what I hear you saying is that the opt-out option does not have to be on the notice that we send to our existing customers? That would make things much simpler. I have been adamant in our committee about the fact that whenever we begin to send out the Notices, we need to be able to handle (manually at this time) any opt outs that we receive. My concern being that existing customers will go ahead and send in their opt outs, especially if we have provided the check box for them to do so.

So - as it all becomes clearer....

1. Effective July 1st (or whenever if we want to comply earlier with new accounts), all new accounts opened will be given the notice and the option of whether or not they want to opt in or out of this type of overdraft coverage.

2. For existing customers, we are required to send them the notice and have them affirmatively consent to their opportunity to continue to receive this type of overdraft coverage. If they want to continue to have us pay for ATM and one time POS debits, they have to opt-in. There is no requirement that we give them the option to opt out. We could/should mention on the notice (or cover letter) that after August 15th we will no longer be able to authorize ATM/POS transactions unless they authorize us to do so.

3. The written confirmation sent to the customer must include a statement of their right to revoke whatever decision they have made.

Is this correct?

Bump

Correct. As for your item 2, not only could/should you mention the 8/15 date, you really must, because if you don't, you'll have to notify them again before you pull the plug (it would be a change in service).

Thanks John for the clarification!

I need some common-sense help again.

I'm reading the A-9 model form and trying to figure out how to alter it to fit our circumstances.

Management is making the decision that we will not authorize and pay overdrafts for ATM transaction and everyday debit card transactions AND that the cusotmer will have not choice in the matter (no opt-in/opt-out).

This means that the Standard Overdraft Practices wording is exactly like it is in the model, except that the wording "unless you ask us to (see below)" will be DELETED.

It also means that the last paragraph about "What if I want..." will also be deleted.

So, my questions are:

1. If our SOP is to NOT pay ATM/one-time debit card transactions, and there is no customer choice, what do we need to send to the customer? Do we still send the A-9 notice, but changed as I indicated so that customers know our practice and fees?
2. How soon before/after the effective date do we need to send out the notice, if required?
3. Normally, the ATM/POS will be rejected at the time of the transaction, if real-time data is being used by the EFT system. However, if for any reason the EFT is using a 'point in time' balance that is not being updated in real-time, what responsibility/liability do we have if at end of day the ATM/POS did overdraft the account?
4. We do offer a 'sweep account'. Again, since the sweep is done being done in real time, do we reject the transaction at POS/ATM, but inform the customer of that in the sweep agreement?

1. In this case I don't think you're required to send the model form. Which releases you from the requirement that it's a separate mailing (meaning your notification could be a statement stuffer, etc.)

2. I would notify everyone at least 30 days prior to the change becoming effective. *edited to add* - I would personally do it as a "courtesy" notification, obviously not required by the Reg. I would just let people know, sort of like BoA did, that beginning on {date} you will not authorize/approve/pay these types of transactions, period. I would probably just do a statement message or a stuffer.

3. If an ATM withdrawal, POS purchase, or signature-based debit card purchase inadvertently ODs the account, you cannot charge a fee of any kind. All your customers are not opted-in so you cannot charge anyone an OD fee. No exceptions (doesn't matter how/when/for how much it was authorized).

4. I'm not really understanding this question. Is this sweep account a linked savings (for OD protection purposes)? If so, I don't see how you could decline a card transaction if the customer has funds available (and has not exceeded the Reg D limit of 6 transfers). But again, I am not clear on your question...

If you are not going to give them a choice there is no need to send them the model form. Just keep in mind, that for those ATM/POS transactions that do get through and overdraw an account, you cannot charge them a fee and you must pay them. I cannot answer you question on number 4.

1 & 2 - If you do not intend to collect the fee you do not need to send the notice.

3. If the customer has not opted in that does not mean you may not pay a covered item that creates an overdraft. It only means he cannot be charged a fee. He is still legally responsible for reimbursing you for the overdraft.

4. Assuming you do not mean the newly coined "retail sweep," but instead an "overdraft protection program" that transfers funds from one account to another, I suggest you inform the customer of the limitation when he signs up for the service; i.e. no transfer will be made to cover a proposed everyday debit card or ATM transaction.

Thanks to all of you who responded. And, yes, Ken I did mean the "overdraft service", so I'll check any disclosure that we may give to customers who enroll in the sweep program (I'm not sure that we do give any so I may have to create one).

I attended the state bankers webinar Ken (Pegasus) presented on 1/19 [which was excellent]. During that session the model form was reviewed and the impression was that the first two sections should not be changed. In the first section the model states "2. We also offer overdraft protection plans, such as a link to a savings account, which may be less expensive than our standard overdraft practices. To learn more, ask us about these plans."
However, would it not make sense to change the "such as ..." statement to match what a bank actually offers? For example if a bank does not offer savings account links, would this not be more confusing to the consumer?
Thanks!

Of course you must alter the form to reflect what you offer. You absolutely cannot include on the disclosure information that misrepresents your practices or services. Follow the requirements of paragraphs 205.17(d)(1)-(6) specifically, using the model form as a "go by" for layout and the order of presentment, emphasis, etc., not as a literal example of what must be included.

Thanks for the quick response John!

John,

For a customer with multiple accounts, would it be ok to use one A-9 form for each customer and specifically identify each account at the bottom of the form and give the customer the opportunity to opt-in for each specific account? There would be one line at the bottom of the form for each account. So, if a customer had 4 accounts, they would have to check 4 boxes to opt-in for all 4 accounts. The alternative is to have one A-9 form for each account.

If your bank is located in Texas, you better amend the section that says you are going to charge $5 per day after 5 consecutive overdraft days. You can't charge that. It would have to be a giant overdraft to charge $5. Sorry.

BOA apparently is charging it..even in Texas, but you can't. BOA isn't using Texas law, and I bet you are.

BSAGuy - Yes, you can use a single form if it can be used by the customer to selectively opt in to multiple accounts (or to all of them, it that's what she wants to do).

_Zaibatsu - The disclosure has to reflect what a bank actually charges, with the understanding that ranges cannot be expressed any other way than "up to" whatever the max is. In other words, if state law makes the fees vary based on the size of the balance, the bank might charge $0.50 to $5.00 a day, but it can only say "up to $5.00 a day."

With a federal charter, BofA probably takes the position that it's not bound by the Texas fee limit.

Our marketing department wants to eliminate the lines at the botttom of the A-9 form ["Printed Name,Date,Account Number"] as our retail management would prefer that we do not promote mailing the notice back as a reasonable means to opt-in. We would be listing opt in methods as phone in, stop in the branch and we will also be providing a PURL with the notice for the customer to go to a website to notify us of their opt in choice. Our overdraft service provider insists that we MUST allow a customer to mail the form back. I read the regulation as only requiring a "reasonable means" to opt in. Do we have to allow for a mail in response?

John, We put a line for the customer to fill in their own account number. If they have more that one applicable account with us they will get more than on letter.

I have a question about the "no" option to opting in. We are sending out the opt in form to our current customers with only the "yes" option. We will be able to document who we sent the letters to and will have a record of that. My question is about new accounts after July 1. The form we have for new accounts also only includes the "yes" option. I'm worried that we will have a hard time proving to examiners that we gave the customer the option at account opening if there is nothing written to show their choice. Do you think this will be a problem?

Nothing in the regulation mandates that you allow or encourage customers to use the disclosure (A-9) form as a turnaround document. In fact, using it for that purpose is deliberately described as an option that the bank can use. Instead, you can use a separate form supplied with the disclosure, or direct customers to a website or telephone line, or invite a personal visit to a branch, or any combination of methods.

Obviously, the easier you make it for your customer to opt in, the better for the bank. Empirical data suggests that engaging the customer in a conversation, face to face or by telephone, is probably the most effective "sales" method.

There should not be a problem. The regulation even suggests that it's sufficient to get the consumer's initials or have the consumer check an optional box (it can't be prefilled), and, if a signature is required by the bank, it cannot be the signature required for agreement to the account terms and conditions. I do recommend documenting the opt-in, but there is certainly nothing that requires you to offer two selections (opt-in and non-opt-in).

Thank you so much for your quick response! My IT department is on the move and we were just about to get the form added to our platform when I thought of this question. Now I can respond to them with confidence after only a few minutes. Thanks again!!

John,
Thank you so much for your quick response. BankersOnline is such a great resource! I don't know what I'd do without it.

I have a question regarding new customers and the new rules. My understanding is that if we establish procedures to collect a new customer's opt in decision, including providing the A-9 form, then as of the date the account is opened we will have to comply with all of the rules including shutting off fees for ATM and one time POS if they do not opt-in. Our management would like to start including the Reg E Opt-In form in our new account process as of 04-01-10. I have recommended that we wait to do this until it's mandatory on 07-01-10 as this could have a negative affect on fee income. We plan on mailing existing customers the A-9 in April. I think we should plan on a follow up mailing for those customers that open an account between the existing customer mail date and 07-01-10. Am I understanding this correctly?

Yes, you are correct. If you offer the opt-in starting 4/1/10 and fail to get it, you can't impose OD fees for covered card transactions overdrawing those new accounts. If you aren't set up to handle opted-in and non-opted-in accounts, you'll have a mess to clean up, and you might have to refrain from fee assessments for all card overdrafts on new accounts until the mess is cleaned up.

Don't jump out of a plane unless you're wearing a parachute.

In regards to the A-9 model form, under #2 which states "We also offer overdraft protection plans.....which may be less expensive than our standard overdraft practices. To learn more, ask us about these plans."

Do we need to include the fee we charge on our overdraft protection plans-linked to a savings account?

thanks,

Does the opt-in form need to include the customer's account numbers or can we allow the customer to fill in the account number(s) to which he/she would like the opt-in to apply?