Danger Ahead: Reg E Model Opt-In and Available Balance

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If you charge overdrafts for ATM and one-time debit card transactions under Regulation E, chances are you provide Regulation E’s model opt-in form to obtain a customer’s consent prior to charging those fees.  It would make sense, as using model forms are supposed to provide us with a sense of security, right? 

Well, apparently that’s not always the case.  

A class-action lawsuit has successfully claimed the Regulation E Opt-In model form was not “clear and readily understandable”.  The reason was because it stated an overdraft occurs where there is “not enough money in your account”.  Since the institution actually used the available balance to determine if an overdraft occurred, the plaintiff successfully claimed the account would not have been overdrawn had the ledger balance been used, as described in the notice.

While the case was dismissed at first, that decision was later reversed.  The ruling also found a possible violation for not giving consumers a reasonable opportunity to affirmatively consent to the overdraft services because of their inability to know whether the service would be based on the available or ledger balance.  In other words, they couldn’t have known what they were getting into.

The court ruled the model form did not protect the institution from liability when communications within its overdraft disclosure inadequately inform the consumer of the overdraft policy that the institution actually follows.

Do your customers know what they’re getting into? 

It’s your job to know they do!  If you use the available balance to determine whether customers incur overdrafts, it’s apparent from this ruling that the language on the model opt-in consent form can put you at risk.

If you want to learn more about the Reg E Opt-In and/or overdraft compliance as a whole, be sure to join us for our Overdraft Webinar on July 30th!


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