Overdrafts are often thought of as a deposit compliance issue, but the fact is they are considered incidental credit. This means they fall under the Equal Credit Opportunity Act, which promotes fair lending. In other words, you cannot illegally discriminate when it comes to overdrafts. So, when you're taking into consideration whether or not to pay or return an item, make sure you are not basing your decision on whether someone is a member of a protected class.
Jerod explains more in the video.
Video Highlights:
- Financial institutions should have a roadmap for how they make decisions on overdrafts.
- Illegal discrimination based on things like gender or race must be avoided in order to comply with fair lending regulations.
- You can consider things like character, average daily balance and account history when evaluating overdraft requests.
Published
2023/06/23
