CUNA Needs Your Input on Pending Overdraft Regulation

Jeff Bloch, CUNA
October 22, 2009 | COMMENTS

The other day, Senator Dodd introduced a bill that would impose restrictions on overdraft protection plans.  This bill would:

• Require financial institutions to obtain a customer's or member's consent before enrolling them in an overdraft protection program for ATM and debit card transactions.
• Limit the number of overdraft coverage fees that could be charged to one per month and six per year.
• Prohibit overdraft fees if it results from a debit hold that exceeds the actual amount of the transaction.
• Prohibit giving consumers accounts with different terms if they do not consent to overdraft coverage.
• Prohibit non-sufficient fund (NSF) fees for ATM and debit card transactions.
• Prevent creditors from submitting negative information regarding the use of overdraft programs to credit bureaus.
• Prohibit an increase in overdraft fees and NSF fees within 1 year after this law is enacted. 
• Require fees to be proportional to the cost of processing the overdraft, to be determined by regulation.
• Prohibit institutions from manipulating the order in which they post transactions in order to charge additional fees.
• Require additional disclosures, including a requirement that accountholders be notified when they overdraw an account on the day the overdraft occurs and be given the option of being notified by in a manner the consumer chooses, such as by email, text message, or traditional mail.
• Require a warning if an ATM or branch teller transaction will overdraw an account, and give the accountholder the option at that time to cancel the transaction.

We would like your feedback or comments in response to the following questions, in addition to any other comments you may have:

1) We realize that the limitation of fees to once per month and six times per year will severely limit the ability to continue to provide overdraft services.  Is there a limitation, either per month or per year, that would be acceptable and what would that be?

2) The bill would require opt-in for overdrafts in connection with ATM and debit card transactions, but will not be required for check transactions.  Is this acceptable for both new and existing accounts?

3) The bill would require a warning at an ATM if the withdrawal will overdraw an account and it would appear that this would include situations in which a member uses a foreign ATM.  Is this feasible, given current technology?

4) The bill would require same day notification to consumers when an overdraft occurs.  How burdensome will that be?  How much time would you need to prepare and send out such a notification?  Will you be able to provide this information in a manner that the member chooses, such as if it is requested by text message or email?

5) The bill would prohibit NSF fees for ATM and debit card transactions?  Would that be acceptable?

Please submit your responses to CUNA Senior Assistant General Counsel Jeff Bloch at jbloch@cuna.com.  Thank you very much.