We currently do not utilize the opt in feature to pay ATM/DC transactions. We plan to start offering it. I know I have to have the agreement signed customers. Once I have that done and flip the switch in core, is that all it entails? We also currently don't have an official "Overdraft Program" so when we do pay the ATM/DC transactions, is that considered Overdraft Protection? Just trying to cover all my bases and avoid any compliance issues. Thank you!

So when your customer opts-in, what changes other than a fee? If I attempt to make a $125 purchase but only have $50 in my account, will you approve or deny the purchase?

Hi Brian

We currently deny the purchase because we don't have the opt in agreement signed by our customer to agree to a fee if we do approve against a negative balance. And we can't charge a fee for the one time transactions or if a transaction is forced through. Is that considered Overdraft protection? Do we have to set a limit on how many transactions or fees on any business day? To me, ODP is where you give a customer a limit and pay up to that amount daily and then charge interest to cover the overdraft. We're not looking to do that, only be able to charge a $25 for each transaction approved against a negative balance. Are we in compliance if we do this?

If you are only planning to obtain an opt-in to enable the bank to charge a fee for those forced transactions, examiners (especially the FDIC) will consider a customer opting into a fee when you are not providing an actual overdraft service to be UDAAP. In other words, if you will continue as a matter of practice to deny my debit card authorizations that would overdraw my account, but charge me a fee for those that slip through and are forced, then you are not providing a service and should not be obtaining an opt-in from me for a service that does not exist.

The Reg E opt-in applies to formal overdraft programs where the bank offers a predetermined limit (or a variable limit based on account activity) up to which it will approve debit card transactions against that limit even if the customer does not have adequate funds at the time the authorization is obtained. Customers do not "apply" for these programs and they are not based on a credit decision. The Bank simply offers this as an add-on service to the checking account.

Opt-ins do not apply to overdraft lines of credit covered by Regulation Z. If I have a line of credit, you would advance against the line to cover overdrafts instead of charging me a overdraft fee. If I exceed my line of credit on a forced transaction, Reg E still prohibits you from charging an overdraft fee.

Put another way...

If I understand your statement correctly, your bank does not currently pay overdrafts for checks, ACH, etc. The item is simply returned unpaid, correct?


That is where the issue comes in. You can't charge a fee for the sake of charging a fee. You don't have an OD program; therefore, there is no program for your customers to opt-in to.

Thank you BrianC

Hi b
urkemi - We currently do pay overdrafts for checks and ACHs ( officer discretion). We do charge a fee for those whether we pay the item or return it. We disclose the NSF fee in our new account disclosures.

Currently, debit card transactions/ATM transactions are declined if the funds aren't available.

We are charging the NSF fee to pay checks and ACHs, so I assumed the same for a debit card transaction if the customer "opts in" and knows that we will pay the debit card items and they agree to the fee.

We have never offered overdraft protection and didn't know if this would be considered overdraft protection.

Since you do not have a formal program, you should not be requesting opt-ins or you risk incurring the UDDAP issues noted above. To obtain opt-ins you would need a formal program that provides an automated way of approving debit card authorizations up to whatever limit you establish for the formal program. Obtaining an opt-in to charge fees for those transactions that slip through on your current process is not a formal program. Your customer would only be opting into a fee and not receiving a service.

Still going to side with Brian. If you don't have a defined protection program, there is no program for your customers to opt-in to. You said yourself - you don't have an official overdraft program. So you're also well aware that officer discretion isn't a program.

With overdrafts being a hot button anyway - if you offered opt-in right now, against any examiner I really fear you'd be fighting an uphill battle. On one leg. With both hands tied behind your back. Blind folded. With a saber made of down feathers.