WASHINGTON (1/15/09)—A Federal Reserve Board proposal to amend its Regulation E to afford consumers more protections regarding overdraft fees would apply to all credit unions and the Credit Union National Association (CUNA) is seeking credit union comment on the plan. The Fed proposal would change rules implementing the Electronic Fund Transfer (EFT) Act. The bank regulator scrapped earlier proposals that would have tried to address overdraft fee programs through rules under the Unfair and Deceptive Acts or Practices (UDAP) Act and the Truth in Savings Act. Those rules, if implemented, would not have covered state-chartered credit unions. The Fed’s current proposal outlines two approaches for providing consumers a choice regarding the payment of ATM and one-time debit card overdrafts by their financial institution and seeks comments on which approach should be adopted in the final rule:
* Opt-out: Under this approach, an institution would be prohibited from imposing an overdraft fee unless the consumer is given an initial notice and a reasonable opportunity to opt-out of the institution’s overdraft service, and the consumer does not opt-out; or * Opt-in: This second approach would prohibit an institution from imposing an overdraft fee for paying such overdrafts unless the consumer affirmatively consents to the institution’s overdraft service.
The Fed’s proposal would also prohibit credit unions and other financial institutions from imposing an overdraft fee when an account is overdrawn because of a hold placed on funds in the consumer’s account that exceeds the actual transaction amount. The prohibition would be limited to debit card transactions in which the actual transaction amount can be determined within a short period of time after the transaction is authorized. Examples include transactions at gas stations and restaurants. In a CUNA Comment Call, CUNA asks credit unions to remark on those and other provisions within the Fed plan by Feb. 25. Comments are due to the agency within 60 days after it is published in the Federal Register
, which should occur within the next several days. Use the resource link below to read more CUNA analysis of the Fed proposal and to access the extensive lists of questions CUNA seeks to have addressed by credit unions.