Is overdraft protection a loan? Even if it's tied to a dda for repayment? I'm a little new to deposit banking, and I'm trying to get my hands around the concept. Any reading suggestions?

Depends on the circumstances and even on who is your regulator. Traditional overdraft protection lines of credit have always been considered credit and are subject to full Reg Z disclosures as such. These are often tied to a DDA for repayment, that doesn't change its status. Newer Overdraft Protection Programs don't contain all the same features as the lines of credit and are therefore removed from Reg Z coverage. Typically the element most often removed is the obligation of the bank to advance available funds from the line. With ODP programs, the bank retains the discretion to pay or not pay the overdraft. Even in those programs, however, most of the regulators agree that paying an account into overdraft is a loan (the OTS is the dissenter here, taking the opinion that because these decision lack tradition credit underwriting they are not loans in the truest sense of the word).

As far as reading suggestions, read the recently issued Interagency Guidance on Overdraft Protection Programs and Andy's article on the same - http://www.bankersonline.com/operations/overdraftreview.html

Thanks, Jim! I hadn't seen the interagency guidance. That definitely makes things clearer.

One last question. Since OD protection is generally considered a loan, can they also be pre-approved? And if so, are there any restrictions since a pre-approval technically negates the risk base analysis?...at least part of it.