Along with everyone else, we have seen a substantial increase in our new account fraud. We are considering using a third party vendor to provide an automated risk score which we will use to determine if the customer should have access to an overdraft limit at time of account opening. We are also considering delaying customer access to their overdraft limit at ATMs until the account has been in good standing for at least 60 days. Essentially, they would not be allowed to Opt-In to use their overdraft limit for one time debit card transactions until their account has been in good standing. Is anyone else doing something similar? How are you handling overdraft programs at time of account opening? Thanks in advance!

I suggest that you give the Updated CFPB Exam Manuel a careful read in considering your approach. The CFPB (and consequently) other prudential regulators have overdrafts squarely in their crosshairs. Reg B considered an overdraft an extension of credit even though Reg Z does not apply. If your risk model leads to disparate impact on protected classes that hold checking accounts being more likely to have their checks returned, your model could be criticized from a fair lending and UDAAP perspective. Any model that you implement should have its criteria carefully reviewed for potential discriminatory risk factors and its output results carefully analyzed for any patterns of discrimination in its outcomes.

The approach to delaying opt-in for 60 days across the board is less likely to incur the same risks as a model, but you must make sure that no one throws a switch on your core prematurely, so fees are not assessed on one-time ATM/debit card transactions prior to the opt-in becoming effective.