Compliance Blog

Nov 13, 2009
Categories: Accounts

Regulation E Final Regulation Released: Worst Case Scenario Realized

Posted by Anthony Demangone

Yesterday, the Federal Reserve issued a final rule to amend Regulation E to limit the ability of financial institutions to charge overdraft fees for one-time POS and ATM transactions.  Under the final rule, consumers must give their affirmative "opt-in" to the overdraft program before such fees can be charged.  The compliance effective date is July 1, 2010.  Here's a nice, depressing one-page summary.

  • The "opt-in" must be given for all accounts.  New and  existing accounts.
  • Anyone who opts in has a continuous right to opt-out.
  • You cannot bundle the opt-in for POS and ATMs with overdraft services for checks and other transactions.  In other words, ATM and POS transactions get their own, independent opt-in.
  • Here's the model opt-in form.
  • Again, while the rule takes affect 60 days after the final rule is published in the Federal Register, the compliance effective date is July 1, 2010.

My general thoughts?

  1. This will affect budgeted revenues for credit unions that charge overdraft fees for these types of transactions.  Insert this information into your budgeting process as soon as possible.
  2. It seems that Congress and regulators do not want us to earn non-interest income.  Overdraft fees. Over-the-limit fees on credit cards.  Interchange.  What would your credit union look like if it lost 80 percent of its non-interest income?  What would you have to do to survive?  Those questions are seeming more and more relevant as time passes.
  3. I wonder if you'll start seeing a resurgence of monthly maintenance fees on share accounts in the not-to-distant future.

Oh, and have a nice weekend everyone.