Can you help settle an argument?

Assuming the customer has opted in, when should an OD charge occur, when the funds are checked against an insufficient available balance or when the funds are posted against an insufficient available balance. I say when the funds are checked against an insufficient available balance. Correct?

Please describe what you mean by the funds being "checked".

In this instance, the customer has a pre-theorized debit that is pending payment, but the available balance is not high enough to pay the item. When the item actually settles, there may be enough funds to cover the item. Can the bank charge an OD fee since there were not available funds at the time of presentment.

Can they? Yes, if that's what your opt-in disclosure says.

Should they? That's in the eye of the beholder. Personally, I absolutely hate this practice (assessing the fee against a presenting item that hasn't even posted yet).

What about if the debit has been pre-authorized on good funds, but when the item settles and there are not available funds? Does that change the situation?

What does your disclosure say?

We charge OD fees on items based on the end of day balance after posting. That's in our disclosures.

You need to determine what you told your customer you would do in the opt-in notice and any other disclosures about OD fees. If it is not clear on how you will charge (presentment vs posting), you have potential UDAAP issues if you charge in a way that is more favorable to the bank.