Answer by David Dickinson:Section 205.17(b)(2) and (3) states:
A financial institution will not (i) condition the payment of any overdrafts for checks, ACH transaction, and other types of transaction on the consumer affirmatively consenting to the institution’s payment of ATM and one-time debit card transactions pursuant to the institution’s overdraft service; or (ii) decline to pay checks, ACT transactions, an other types of transactions that overdraw the consumer’s account because the consumer has not affirmatively consented to the institution’s overdraft service for ATM and one-time debit card transactions.
(3) Same account terms, conditions, and features. A financial institution shall provide to consumers who do not affirmatively consent to the institution’s overdraft service for ATM and one-time debit card transactions the same account term, conditions, and features that it provides to consumers who affirmatively consent, except for the overdraft service for ATM and one-time debit card transactions.My short version: you cannot in any way discriminate against a customer because he/she does not opt in.
Answer by John Burnett:Not only do I think that denying a debit card because a consumer has failed to opt in is a violation of the regulation, I think it's short-sighted. Most cardholders do not overdraw their accounts, and debit card transactions, particularly those that are signature-based, passing through the MasterCard or Visa network, provide substantial interchange fee income. Canceling or refusing a card, presumes the customer can't avoid overdrafts, and that the customer will cost you money. If an occasional transaction has to be paid into overdraft because of delayed posting or for whatever reason, most customers will cover the overdraft, and you won't be out anything, except the overdraft fee that you can't assess. It's when customers make a habit of getting free dips into the overdraft pool that a bank ought to be concerned, and they can then take action to cancel a card or close an account for mishandling, not for failure to opt in.
First published on BankersOnline.com 5/24/10