Point of Sale Transactions: NSF Fees & Disclosures

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Question:

I have a question that involves point of sale transactions (POS) on a statement savings or NOW checking account; can we charge a fee for the following scenario?A customer has a balance in a statement savings or checking account of $100.00. They use their ATM/Master Card Debit to make a purchase of $100.00. The same day they make a withdrawal over the counter for $50.00, the preauthorized debit comes through the next day and the account is overdrawn by $50.00.The questions again are: <ol><li>Can we charge an NSF fee for the point of sale transaction which has now put their account in the negative? <li>We cannot return a POS once it has been pre-authorized, right? <li>And, what disclosure must we provide to the existing customers as well as new ones if we are allowed to charge a fee? <li>What is the maximum fee we can charge, if any?</ol>

Answer:

First your questions: You may charge a fee for an overdraft if you have previously disclosed that fee to your customer, and if state law does not forbid it. Remember that the words used to describe the fee in your disclosure must agree with the words that will appear on the statement.

You are correct that you cannot return a pre-authorized POS debit for overdraft, under the MasterCard/Visa rules.

If you wish to implement the fee, you must provide existing customers with a 30-day advance notice.

The maximum overdraft fee will depend upon state law, unless preempted by federal charter.

Now, to the question of POS against a statement savings account: Most networks will not allow you to designate a savings account as the account for POS debits. However, if you've found a way to do it, you must be aware of the Regulation D constraints. Unless you class the savings account as a transaction account for reserve calculation purposes, you must limit customer transfer activity from the account. POS transactions are included in the 3 per month "checks, drafts and other third party transfer" limits.

First published on BankersOnline.com 04/07/03