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Washington
Regulation is the better overdraft approach CUNA
WASHINGTON (11/13/09)--The Federal Reserve Board's final rule on overdraft protection plans, which was released on Thursday, “should give Congress pause before it proceeds further with the various legislative proposals that are now pending,” according to Credit Union National Association(CUNA) President/CEO Dan Mica. The Fed rule, specifically, would require credit unions and other financial institutions to obtain consent from consumers before they could be charged overdraft fees for ATM and one-time debit transactions. The rule, which will go into effect on July 10, also requires credit unions and other financial institutions to fully disclose the overdraft services, the fees, and the consumer’s right to opt-in, and ensures that members or customers that do decide to take part in the overdraft protection service may cancel the service at any time. (See related story: Opt-in featured in Fed overdraft rules.) Sen. Christopher Dodd (D-Conn.) and Rep. Carolyn Maloney (D-N.Y.) last month each introduced bills aimed at addressing overdraft fees by prohibiting them unless the member or customer exercises the option to opt-in to the program. Dodd's legislation only requires the opt-in provisions for ATM and debit card transactions, while Maloney's bill would impose opt-in requirements for all transactions. Both pieces of legislation are awaiting committee action on their respective sides of Congress. While the Fed rule “may present compliance challenges for certain credit unions,” Mica said that the rule does not present the same challenges or restrictions that are included in either piece of legislation. Those include restrictions on the amount and frequency of overdraft fees or requirements that force financial institutions to provide same-day notification to consumers when an overdraft is paid or notification if an ATM transaction will result in an overdraft. “CUNA's position has been that a regulatory approach to these issues is far preferable than these legislative initiatives,” Mica said. CUNA is analyzing the rule, and will provide credit unions with a more in-depth explanation of how the rule could impact their business practices as soon as possible.
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