Social Security Offsets: Aren't overdraft fees extensions of credit? What about Reg B?

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Question:

I have read the article by Mary Beth Guard on <a href="http://www.bankersonline.com/operations/cissoffsets.html">"Offsets Against Social Security Payments"</a>. At the end she asked two important questions, which have triggered questions I have. 1) Aren't Overdraft privileges and outstanding overdraft fees, extensions of credit? and therefore, 2) What about Reg B a) cannot discriminate on basis of Age (over 62), most SS recipients are over 62; and b) part or all of income derives from public assistance (both SS and SSI are public assistance)? Can you clarify these issues?

Answer:

Overdrafts are repaid when the next deposit is made. While these are loans the bank has made, they are not necessarily loans under Reg. Z, requiring appropriate disclosures.

Section 226.1 (c)(iii) identifies coverage is applicable when the credit is subject to a finance charge or is payable by a written agreement in more than 4 installments.

Overdrafts are generally charged a servicing or processing fee, not a finance charge, and are due immediately, not in payments.

First published on BankersOnline.com 5/06/02