League InfoSight Highlight: Overdraft Opt-In Documentation

I remember working at the credit union 14 years ago (July 1, 2010, to be exact) when the mandatory compliance date for the opt-in rules for ATM or one-time debit card overdraft transactions became effective. It was quite the initiative to inform our membership of the change, document their affirmative consent, and send them written confirmation.

Just this week, the CFPB refreshed that memory with a new circular regarding improper overdraft opt-in practices. This circular focused on the violation of Regulation E (and the Electronic Fund Transfer Act) when there is no proof of affirmative consent to enroll and opt-in the consumer to overdraft services for ATM or one-time debit card transactions.

Regulation E requires that members must specifically opt in, providing affirmative consent to allow for overdraft coverage for their ATM or one-time debit card transactions. Credit unions are also required to provide the member with written confirmation of that authorization (after the opt-in) before charging any overdraft fees for those services.

The CFPB found that the institutions under its supervision were unable to show policies and procedures were being followed with respect to these requirements, and records were not maintained to prove consumers affirmatively consented to enroll in covered overdraft services.

With overdraft practices under scrutiny in general, it’s a good time to review your credit union’s program to make sure your processes are well-documented and evidenced. Validate that you are properly maintaining your member’s opt-in and can furnish the documentation and the written confirmation you are obligated to provide (yes, this can be electronically submitted). Make sure your policies and procedures are also well-documented and maintained. We have several resources available to help ensure your program is comprehensive.

• InfoSight
  • ACH/Electronic Payments – Electronic Fund Transfers - Regulation E – Overdraft Fees for ATM and One-Time Debit Card Transactions
  • Accounts – Overdraft Payment Programs