When we talk to institutions about overdrafts, most are very aware that, if they originate an overdraft loan or line of credit, it falls under Regulation Z (Truth in Lending) and requires certain disclosures. Outside of that, institutions often look at overdrafts as an operational issue and something that falls under deposit compliance regulations like Regulation DD (Truth in Savings) or Regulation E (Electronic Fund Transfers). While this is true, overdrafts are still considered to be incidental credit for purposes of Regulation B. In its Joint Guidance on Overdraft Protection Programs, the Agencies stated, “Incidental credit” includes consumer credit that is not subject to a finance charge, is not payable by agreement in more than four installments, and is not made pursuant to the terms of a credit card account. Overdraft protection programs that are not covered by TILA would generally qualify as incidental credit under Regulation B. Any time Regulation B is on the table, you need to be aware of fair lending risks, including where overdrafts are concerned.
Jerod explains more in the video.
Published
2025/06/23
