Surprise, surprise...managment is in the process of moving towards an automated overdraft protection program - and our compliance officer was never informed. We currently have an ad hoc program (pay/return decisions are made by an individual every day). We are an OCC regulated bank.

What are some of the compliance issues that should be reviewed before making such a change? Reg E opt-in requirements, OCC Overdraft guidance...anything else?

Watch out for the advertising and balance inquiry provisions of §230.11 in Regulation DD.

Don't forget the Interagency Overdraft guidance from 2005. It's still being enforced by the regulators. And don't dismiss the OCC's most recent proposed guidance just because it hasn't yet been finalized. It shows how the OCC is thinking, and it's principal-based, rather than mandating specific actions. So those principals are something you really ought to pay attention to.

If there's an overarching principal, it's transparency. Make sure that you explain everything there is to know about the program in terms your middle-school kids can understand, and don't get cute with disclaimers in gray-tone micro-print footnotes. Hammer home in your promotional and disclosure materials the costs involved and provide meaningful comparisons with alternative ways offered by the bank to cover overdrafts.

Make sure your systems or those of your vendor can handle the program the way you design and describe it. Also ensure you get good-quality management reporting on customers who are abusing or abused by the program (depends on your perspective, I guess) and paying huge OD fee amounts.

Great information John. I totally forgot about the balance issues in Reg DD. Thank you!