I thought opting in accounts that didn't have OD limits was taboo. Then I saw this from Chase, where it LOOKS like they are rationalizing opting in customers who don't have a limit because "...many deposits you make are not available immediately..." and their service "provides options when you need them." Is this an acceptable practice?

Here is the link to their discussion of this service:

https://chaseonline.chase.com/resources/Chase_Opt_In_Branch_Flyer_v6.pdf

Thanks, WD

Looks like a variety of an ODP program to me.

Agreed. Although stating a dollar limit is common, there is no requirement that there be a limit or, if there is a limit, that it be disclosed.

Ken - I know that there is no explicit requirement that there be a limit, but I also heard (second hand) that OCC participants in panel discussions had floated the idea that opting a customer in without that customer having a limit would be tantamount to the customer unwittingly only opting into a fee, and no real additional coverage. Further, we heard chatter that could be construed as a UDAAP violation. Has OCC backed off of this idea? Or did they never officially hold it?

Thanks in advance,

WD

I think you characterized it accurately: It was comments made by individual examiners. However, a suggestion that a bank should disclose a specific dollar limit was never in anything published by their employer. Some examiners rely purely on divine guidance, regardless of what their employer or even the law says.

tantamount to the customer unwittingly only opting into a fee, and no real additional coverage

That is not what this program does anyway. They say they will authorize charges presented against the account when the available balance is not sufficient - hence they will authorize, pay and charge. If the customer does not opt-in, then these transactions would be rejected and the customer would receive no charge as the transactions will not occur.

I think we are talking apples and oranges.

rlcarey - I agree that the example illustrated in Chase's document is as you describe, but a side effect (perhaps intended!) is that Chase then gets to charge for unavoidable (think, "gas stations") overdrafts as well, which occur even when the customer does not opt in.

So...it's probably apples, oranges, and oranges ;-)

The way I read it, there is a limit, but it fluctuates depending on your account history.

Q. If I sign up for Chase Debit Card Coverage, will my debit card charges always go through?
A. No. Whether a transaction will be paid is discretionary and we reserve the right not to pay. The amount of Chase Debit Card Coverage will vary based on your account history, including your deposit and spending patterns.

In essence, it's an ad hoc system.

Examiners accustomed to a disclosed dollar amount may be confused it its absence. However, even if a dollar amount was disclosed the bank and the amount of the transaction was less, the bank was still not required to honor the transaction, just as the disclosure indicates.

I think rlcarey hit the nail on the head in that the program authorizes POS transactions that would otherwise OD the account. Authorization of the transaction is the benefit. The OD fee is the cost of that benefit.

The FDIC has made a big issue of this in recent years for folks that had a program (opt-in) with no limit because the customer received no benefit from the opt-in. They were only charged a fee. All of their potential OD transactions were declined because they had no "padded funds"

The American Bankers Association published a document about this exactly two years ago 02/28/2012.

Understood, but if there was padding in the form of an undisclosed dollar amount, they would have gotten the benefit of the bargain.