When a customer opens an account, they aren't eligible for OD services for 3 months.

We want to have them sign the opt-in form (if they want to) at account opening, even though they couldn't OD their account for at least 3 months. Is this okay? Or should we be sending the form to them once the OD services kick in?

What if they never qualify for the OD program even after 3 months? Will you use the opt-in from account opening to justify charging fees before they are eligible for the OD program?

You would be wise to wait and solicit the opt-in after the 3 month period when they become eligible.

We have a similar situation (though it is only 30 days until they are eligible). I agree with Dani, but would be interested in hearing how other FIs are handling the issue. Our system requires us to choose an option (Accept, Decline, Revoked, etc.) at account opening. I guess we could use the 'Failed to Respond' option (even though it isn't really an accurate description of the situation).

We provide it at account opening. From my understanding, there is no timing requirement for the opt-in notice, except that it must be provided prior to charging an overdraft fee. Am I missing something?

There is potential UDAAP if you solicit the opt-in and charge for ODs if the customer doesn't have the OD service. So if you solicit the opt-in at account opening but the OD service isn't available for 3 months, you have a UDAAP situtaion if your system charges OD fees on the ODs caused by POS and ATM during that time frame (ie your customer opted into only paying a fee since there was no OD service during the first 3 months).

Orig Anon: I have addressed that with operations and basically my recommendation is this (since they don't like my option of opting everyone out until they become eligible for the service:

Opt in @ account opening. Send a reminder when they become eligible. However, until that time, the system MUST treat them as if they opted out (and this will need to be discussed with customer).

I recommend being very careful. This has been discussed with at least one bank in Kentucky as a potential UDAAP issue.

Dani, I think I misunderstood the OP. I was under the impression that the service was not available at all for 3 months; in other words, if the consumer tried to OD via ATM or POS, it would not go through, therefore there would be no cost.

I don't understand what it means to be ineligible for OD for 3 months, unless it means the consumer physically cannot OD for 3 months. Our OD program is free unless an actual OD occurs, so no OD, no cost. Therefore, we have consumer opt in at account opening if they choose. If they choose not to opt in, they do not have the ability to OD.

Still

I think it depends on who your regulator is too. I understand that the FDIC has taken a hard line stance on this.

Our system requires a certain number of deposits to be made and no overdrafts in the first month, then the system automatically turns on the ODP feature.
The UDAAP concern comes from the idea that, since they don't have any ODP yet, then all the customer is opting-in to is the fee. During that first month without ODP, a gas station could preauth $1 on an account with a $5 balance, but the actual $30 settlement charge could overdraw the account. In this case, they would be opted-in to a fee, even though they aren't yet participating in the ODP.

We all know that even if there is no OD service timing issues and the fact that card network rules don't always require an authorization can force a bank into paying a POS or ATM transaction into an overdraft. But there can't be a fee for doing so if there's no opt-in in effect and there should not be an opt-in if the bank does not and will not provide actual OD service for card transactions.

Yes.

The consumer is more likely to understand the choice when it is the only choice they are being asked to make and they are not consumed with concern over whether your bank has the checks with puppies on them.

Thanks for the laugh this morning Ken!