CUNA Compliance Challenge covers Reg E overdraft notices
WASHINGTON (8/2/10)--In the July edition of Compliance Challenge, the Credit Union National Association (CUNA) addresses questions regarding Regulation E.
The new Regulation E overdraft rules for ATM and one-time debit card transactions require credit unions to provide members with the right to opt in, or affirmatively consent, to a credit union's overdraft service for ATM and one-time debit card transactions. Under Regulation E, credit union members must opt-in for overdraft protection by Aug. 15.
According to CUNA, credit union websites may not be set up to compel a member to make an opt-in choice. While the credit union featured in the Compliance Challenge sought to display a pop-up screen that would request that members opt-in to overdraft services before moving on to the main home banking site, CUNA said that the member must be allowed to completely reject any overdraft service. CUNA suggested that the credit union provide an "ask me later" option that would remind the member of the availability of the overdraft program when they log on to the credit union site at a later time.
While the pop-up screen proposal would have violated Reg E, CUNA said that a credit union whose overdraft confirmation notices are delayed by a computer error are not in violation of the rule. Credit unions that find themselves in this situation may charge overdraft fees to member accounts as long as they have adopted and follow reasonable procedures designed to ensure that overdraft fees are assessed only in connection with transactions paid after the confirmation notice has been mailed or delivered to the member.
CUNA noted that the Fed's recent clarifications to the Reg E overdraft rule recognized that there may be certain instances where financial institutions inadvertently assesses a fee before the confirmation is mailed or delivered. In these cases, the credit union's adherence to the appropriate policies and procedures will save the institution from a compliance violation, CUNA said.
For the full Compliance Challenge, use the resource link.
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