We’ve known for a long time now that regulatory agencies do not like overdrafts. And, while overdrafts have been a lingering hot topic, we have recently started seeing more and more civil cases, consent orders, etc. The most recent being a $191 million consent order.
The CFPB ordered Regions Bank to pay $50 million to the CFPB’s victims' relief fund and refund $141 million to customers who were harmed by their overdraft practices. The issue at hand was that Regions Bank was operating on a “authorizes positive / settles negative” basis with respect to ATM withdrawals and debit card purchases. In other words, at the time a transaction was authorized, it showed the account had sufficient funds. However, when the transaction was later posted to the account, the account showed there were insufficient funds, and overdraft fees were subsequently charged.
The unfairness of this “authorizes positive / settles negative” practice is nothing new, and Agencies have been cautioning banks about this as far back as 2015. Not everyone got the message, and a consent order of this magnitude should likely get your attention. We must also add that Regions Bank had been fined previously for overdraft practices and also knew this was an issue for years and did not do anything to remedy it.
The message is specific to banks that have implemented a Regulation E Opt-in so that they may charge an overdraft fee for ATM and one-time debit transactions that cause the account to become or remain overdrawn. Therefore, now would be a good time to review your ATM and debit card authorization practices. For those that have not implemented the Regulation E Opt-in, the message should be a non-issue as overdraft fees cannot be charged for ATM and one-time debit transactions (ever).
Published
2022/10/11
