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#2242298 - 09/10/20 09:42 PM Opt In/Out Disclosure - Online Account Opening
Mel in WA Offline
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We are changing our online account opening platform and I watched a demo today. The consumer chooses it they want a debit card right after selecting a checking account. If yes, they are asked to read and make a choice (opt in or opt out) on the Reg E overdraft disclosure BEFORE agreeing to E-Consent or receiving the EFT disclosure.

It seems out of order and I'm not sure it's OK. Thoughts??

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#2242300 - 09/10/20 09:54 PM Re: Opt In/Out Disclosure - Online Account Opening Mel in WA
rlcarey Online
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I assume the account comes with an immediate overdraft protection program?
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#2242301 - 09/10/20 11:17 PM Re: Opt In/Out Disclosure - Online Account Opening Mel in WA
BrianC Offline
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Randy's point is the customer can't opt in and start being charged fees for one-time ATM/debit card transactions if there is a waiting period before the program is active. (Otherwise all they are opting into is a fee which examiners consider unfair since they are paying for a service that hasn't been active yet.)

To your specific question, 1005.17 makes it clear that E-SIGN consent must come before the model A-9 disclosure.

1005.17(b)(1)(i) Provides the consumer with a notice in writing, or if the consumer agrees, electronically, segregated from all other information, describing the institution's overdraft service;
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#2242302 - 09/10/20 11:40 PM Re: Opt In/Out Disclosure - Online Account Opening Mel in WA
Mel in WA Offline
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If the account is opened in-person, the consumer is asked if they want to "opt-in" which means they are agreeing to allow debit card transactions to process, even if there are insufficient funds available. This would be overdraft protection in my mind. However, if the consumer is never asked the question, the default decision is "opt-out", so debit card transactions would overdraw the account if funds are not available.

So, to answer Randy's question, overdraft protection is not automatically offered as a default. The account holder must choose to opt-in. It would not become active until the debit card is received.

BrianC - It seemed backwards to offer the Reg E overdraft opt-in prior to the E-SIGN consent. I will definitely be talking to the vendor. Thanks!

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#2242306 - 09/11/20 01:47 AM Re: Opt In/Out Disclosure - Online Account Opening Mel in WA
Inspector Offline
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Out of curiosity, why would there be a delay before the program becomes active after a customer opt-in?
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#2242308 - 09/11/20 11:03 AM Re: Opt In/Out Disclosure - Online Account Opening Mel in WA
rlcarey Online
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You also cannot just have an ODP program that only covers debit card transactions, it has to cover any presentment, be it check, ACH or debit card. Typically, there are two opt-ins. They first opt-in to the ODP program. Once they do that, then they are given the opportunity to opt-in to ATM or one-time debit card transactions.
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#2242310 - 09/11/20 02:09 PM Re: Opt In/Out Disclosure - Online Account Opening Mel in WA
BrianC Offline
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Quote
Out of curiosity, why would there be a delay before the program becomes active after a customer opt-in?


Many programs are designed to not provide the service for the first 30 days after the account is opened because the bank may have transaction thresholds that must be met before it is willing to pay overdrafts on an account. They should not be charging overdraft fees on one-time ATM/debit card transactions if the service is not yet active for the customer during that timeframe.
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#2242347 - 09/11/20 08:02 PM Re: Opt In/Out Disclosure - Online Account Opening Mel in WA
Richard Insley Offline
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For many years, it was safe to say that ALL Reg. E disclosures had to be provided "in writing." Section 1005.4(a)(1) says (since 1/16/14), in relevant part, "Disclosures required under this part [meaning all of Reg E] shall be...in writing,...except as otherwise provided in this part." (That section went on to confirm that since the enactment of ESIGN in 2000, "in writing" automatically includes electronic documents provided to consumers who have granted informed demonstrable consent.) Are there now any Reg E disclosures for which the delivery method is "otherwise provided"...i.e. NOT "in writing"?
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#2242350 - 09/11/20 08:11 PM Re: Opt In/Out Disclosure - Online Account Opening Mel in WA
BrianC Offline
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There are a couple:

1005.9 (e) Exception for receipts in small-value transfers. A financial institution is not subject to the requirement to make available a receipt under paragraph (a) of this section if the amount of the transfer is $15 or less.

1005.10 (a) Preauthorized transfers to consumer's account. (1) Notice by financial institution. When a person initiates preauthorized electronic fund transfers to a consumer's account at least once every 60 days, the account-holding financial institution shall provide notice to the consumer by:
(iii) Readily-available telephone line. Providing a readily available telephone line that the consumer may call to determine whether the transfer occurred and disclosing the telephone number on the initial disclosure of account terms and on each periodic statement.
Last edited by BrianC; 09/11/20 08:14 PM. Reason: Added a second exception
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#2242365 - 09/11/20 11:22 PM Re: Opt In/Out Disclosure - Online Account Opening BrianC
Richard Insley Offline
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Originally Posted by BrianC
...not subject to the requirement to make available a receipt
This one sounds more like an exemption than an a delivery format option.
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#2242446 - 09/15/20 03:22 PM Re: Opt In/Out Disclosure - Online Account Opening Mel in WA
Mel in WA Offline
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Based on this discussion, I did a little digging into our Overdraft Management System (OMS). Customers are automatically enrolled in our OMS at account opening. The disclosure thoroughly explains the program, but does not prominently give the user direction on how to opt-out. A customer would have to initiate contact and ask about it after the account is opened.

Is there a regulation citing that states we need to offer an opt-out to OMS? Or, is it just a best practice? For the Reg E (ATM/debit cards) overdraft, we are specifically asking the question in-person and online at account opening. A form must be completed. However, for OMS, the option to opt-out is really buried. Overdrafts are always a hot topic, so I want to make sure we are doing it right.

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#2242448 - 09/15/20 03:45 PM Re: Opt In/Out Disclosure - Online Account Opening Mel in WA
rlcarey Online
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Comes down to your regulator's expectations. For example, the FDIC:

Although the FRB did not address the payment of overdrafts resulting from non-electronic transactions, such as paper checks or automated clearing house (ACH) transfers, the FDIC believes institutions should allow customers to decline overdraft coverage (i.e., opt-out) for these transactions and honor an opt-out request.
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#2242449 - 09/15/20 03:47 PM Re: Opt In/Out Disclosure - Online Account Opening Mel in WA
BrianC Offline
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2005 Joint Agency Guidance on Overdrafts

"Provide election or opt-out of service. Obtain affirmative consent of consumers to receive overdraft protection. Alternatively, where overdraft protection is automatically provided, permit consumers to “opt out” of the overdraft program and provide a clear consumer disclosure of this option. "

Remember you can have all the correct "verbiage" and still be cited for UDAP if consumers don't understand their options or how the program works.
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#2242474 - 09/15/20 07:33 PM Re: Opt In/Out Disclosure - Online Account Opening Mel in WA
Mel in WA Offline
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Great information! Thanks rlcarey and BrianC. smile

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#2242477 - 09/15/20 08:30 PM Re: Opt In/Out Disclosure - Online Account Opening Mel in WA
John Burnett Offline
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The FDIC's 2010 "Final Overdraft Payment Supervisory Guidance," in FIL-81-2010, indicates that the "FDIC expects financial institutions to promptly honor customers' requests to decline coverage of overdrafts (i.e., opt out} resulting from non-=electronic transactions." Later in the document, it repeats that guidance, saying, "Although the FRB did not address the payment of overdrafts resulting from non-electronic transactions, such as paper checks or automated clearing house (ACH) transfers, the FDIC believes institutions should allow customers to decline overdraft coverage (i.e., opt-out) for these transactions and honor an opt-out request."
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