I am trying to determine if one of our consumer products would be classified as an "overdraft line of credit" for the Payday Lending Rule. This product is a line of credit directly tied to the consumer's checking account. In fact the account and the loan bear the same number. There is no plastic and there are no checks associated with the line of credit. Should the customer's account become overdrawn, the system automatically makes a transfer from the line to the account. But...the customer can also, through the Bank's online system, transfer money from the line to the account without an overdraft. For example, if the customer knows he/she is going to buy some furniture for $1,500, the customer can either write a check or use a debit card on the account, causing an overdraft, resulting in a transfer from the line, or the customer can go to the on-line banking system (or call his/her banker) and make the transfer ahead of time. The result is the same.

Based on that, would this be an overdraft line of credit for the PayDay Lending rule?

Anyone have an opinion?

So basically you have a line of credit that sweeps to the customer's account. Is the line of credit secured or unsecured?

I believe what you describe meets the requirement for exclusion of overdraft services and lines of credit from coverage of part 1041 under §1041.3(d)(6).

Yes....unsecured....sorry I left out that important detail.

Thanks for your input!!