Overdrafts: Regulation E Opt-In

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The Regulation E Opt-In rules for one-time debit and ATM transactions have been in effect for quite some time now. On occasion, we do still see institutions that offer an opt-in yet the consumer receives no benefit for doing so. That’s a problem!

Jerod explains more in the video.

TRANSCRIPTS:

We're going to start with the Regulation E Opt-in. With that opt-in, as it relates to disclosures and agreements, C1 a, says, "Make certain that if you're offering an opt-in under Reg E, for one-time debit and ATM transactions, that the consumer gets a benefit for opting in." Remember they're opting in so that you can charge them an overdraft fee; that you can't charge them if they don't opt-in. So what's their benefit? Well, remember, these are ATM transactions, you're not going to reverse them for the most part. And then we've got one-time debit transactions. If it's authorized at the point of sale, there's no reversing that. What you have to be able to tell the customer is all right, when they say, why would I opt-in? Well, if you opt-in, you're going to get cushion funds that are behind your account.

So that when you're at Walmart and you got $200 in your account, and you want to buy a $300 item, it goes through. If you don't opt-in, and you're at Walmart and you want to buy a $300 item, and there's only a $200, your account, it's going to get declined. That's the way it's got to be explained. But if I have $300 in my account and want to buy a $300 item, it goes through. Yeah, it goes through, whether you opt-in or not. So you have to be able to clearly articulate what the opt-in is and how it works. So make certain there's a benefit; that they get something over and above you just being able to charge them.

Letter B is a reminder you cannot tie the decision to opt-in, or not opt-in into one-time debit, and ATM transactions to your overdraft services for checks and ACHs.In other words, if I don't opt-in so that you can charge me for one-time debit and ATM transactions, then you can't say, well, we won't offer you overdraft services for checks and ACHs. They have to be talked about separately. We talked about that earlier today. I need to be able to say, I want in or out on one-time debit and ATM transactions. Independently, from whether I want in or out on checks or ACHs, because you can't have the checks ACHs be dependent on whether or not I've opted in under your one-time debit ATM transactions.

Letter C: Delayed Benefit. So one of the things we've seen, and we don't see it as much anymore is: the bank provides me an opt-in and I opt in. So you can charge me, and you start charging me immediately, like the first time I become overdrawn.

But with the benefit that I get from you, that cushion of funds, a lot of times the bank will delay it for 30 days. They say that I have to meet certain criteria, and then a customer for 30 days before you'll give me that cushion of funds. Well, that's not fair, talk about unfair, deceptive, or abusive acts or practices. I opt-in, and you benefit immediately by being able to charge me if I have one of those types of transactions, that overdraws my account, but I don't get the benefit; the cushion of funds until 30 days later. That's not fair that you benefit today, and I benefit 30 days later.

Published
2022/07/13