Overdraft Chaos Update...Some Good News, Some Bad News
By Jerod Moyer
While we don’t have anything “official” from the FDIC (this has been their baby) or any other regulatory agency, the ABA has posted an update (The Compliance Source 2/14/12) on the recent overdraft chaos. We addressed the issues in our December 2011 newsletter and recently posted a blog as well on the topic.
First the good news…
“[The] FDIC DC has not authorized its examiners to cite UDAP violations where banks actually have a bona-fide discretionary overdraft service for covering one-time debit-card transactions (such as an automated overdraft program, promoted or not) even though customers who opt-in are charged an overdraft fee for “force pay” situations whereas customers who did not opt-in have the same “force pay” transactions covered without a fee.”
In plain English, if you have something to offer (i.e. Bounce Protection, Overdraft Defender, etc.) you’re good to go, even with respect to opt-ins and force pay transactions. An examiner should not be threatening you with UDAP!
And, the bad news…
There still remains a UDAP issue for those of you who provided an opt-in bit did not provide an actual benefit to the consumer.
“[The] FDIC DC has permitted its examiners to apply UDAP analysis where banks with a policy and practice of not paying ATM or one-time debit card transactions into overdraft, which the FDIC describes as “no-pay” banks, charge overdraft fees in a force-pay situation to customers who opted-in to an “overdraft service” using the Model A-9 notice. The FDIC asserts that this constitutes legal deception because the bank’s no-pay policy really means it does not provide discretionary overdraft protection coverage for debit card transactions.”
And last but not least, we’ll continue to hold out hope for some type of official guidance from a regulatory agency in the near future:
“FDIC expects to clarify instructions to examiners about how these “no pay” situations should be handled from a supervisory standpoint on a going-forward basis.”
Stay Tuned!