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Charging an Overdraft Percentage

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Our bank would like to start charging an overdraft percentage on accounts that remain overdrawn for an extended amount of time. What stipulations are there to doing this?

If done correctly, it would not be covered under Regulation Z:

Paragraph 4(c)(3).
1. Assessing interest on an overdraft balance. A charge on an overdraft balance computed by applying a rate of interest to the amount of the overdraft is not a finance charge, even though the consumer agrees to the charge in the account agreement, unless the financial institution agrees in writing that it will pay such items.

You would have to check state law regarding usury application. You would have to add the amount of the charge into the statement period and YTD overdraft charges on the periodic statements (as of 01/01/10).

Be careful. Beginning 7/1/2010 you will not be able to impose this charge on a consumer account to the extent that the overdraft balance was triggered by an ATM or one-time debit card transaction, unless you have received the consumer's affirmative consent (an opt in) for coverage by your overdraft service covering such card transactions.

First published on 1/18/10

First published on 01/18/2010

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