We are in the process of setting up Zelle for bank customers. We offer an overdraft privilege program to our customers also. The question was asked whether or not a customer can access their overdraft limit through Zelle. My first thought is yes....it's available to them so why not. But there was also some worry about allowing this. If you offer Zelle currently, do you allow the customer to access their OD limit through Zelle?

BTW.....the debits/credits through Zelle will be by using the account number (not a debit card). It will hit the account immediately as a one time debit.

Risks or no risks for allowing this? Part of me says it's no riskier than anything else and another part of me says it's a bad idea.

Thoughts?

Zelle and overdrafts have both received some negative attention - which is probably why you feel like it's a bad idea. I haven't read or heard of anything that would state you can or cannot allow this.

We don't offer Zelle, so I can't speak from experience, but my initial thought is disclosure. Be painfully and annoyingly clear about it to your customers. Is it possible to provide notice at the time of transaction? "This transaction will overdraw your account. An overdraft fee of $xx will apply. Do you want to proceed?"

@burkemi - Thanks for your feedback! You're exactly right...I'm sure it's because of the negative attention both of these products are receiving lately. I do like the idea of a notice at the time of transaction. I am definitely going to check with our vendor to see if this is possible. Zelle is pretty strict with what they allow and don't allow, so I don't know if this can happen or not, but definitely worth checking into.

Thanks again. I appreciate it!

Will your "Overdraft Privilege Program" open yourself to bigger losses on fraudulent charges?

Joe Customer has $100.00 in account and fraudster attempts to access $150.00 via Zelle. Wouldn't you rather mitigate the loss to $100.00 than $150.00?

*devil's advocate asking*

Doesn't this risk exist ubiquitously anywhere an OD program exists?

Debit card opt-in
ACH
Forgery
Online bill pay

All have the same scenario you described. $100 available, but a bad actor accesses $150.

*Just acting as the little devil on the other shoulder*

i'm not a fan of any OD program that gives unsecured loans to clients, regardless of the method. while some of those offer protection and return rights to the bank, Zelle does not. you take a loss with zelle, the banks eats it, not the client.

I appreciate everyone's responses and sorry to respond late - I ended up being out sick the end of last week.

I kind of have the same thought process as burkemi - we take this risk by offering our OD program - so the risk is already there. The issue we have now is, I'm not sure that Zelle will work correctly and allow an overdraft limit to be used. From what we are finding, it will only look at the current balance and not take into account an overdraft limit or overdraft protection account.

So, whether we offer it or not, might not even be an issue.