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OCC Bulletin 2005-9 | April 6, 2005

Overdraft Protection Programs: Interagency Guidance


Chief Executive Officers and Compliance Officers of All National Banks, Department and Division Heads, and All Examining Personnel

As of November 20, 2013, this guidance applies to federal savings associations in addition to national banks.*

Recently, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the National Credit Union Administration (collectively, the agencies) jointly published in the Federal Register a notice entitled, "Joint Guidance on Overdraft Protection Programs."  This final joint guidance reflects revisions and clarifications resulting from comments received on proposed guidance, which the agencies published on June 7, 2004 (69 FR 31858).

The joint guidance identifies concerns raised by institutions, financial supervisors, and the public about the marketing, disclosure, and implementation of overdraft protection programs.  The guidance contains three primary sections: Safety and Soundness Considerations; Legal Risks; and Best Practices.

The safety and soundness discussion seeks to ensure that financial institutions offering overdraft protection programs adopt adequate policies and procedures to address credit, operational, and other associated risks.

The legal risks discussion alerts institutions of the need to comply with applicable laws, and advises institutions to have their overdraft protection programs reviewed by legal counsel to ensure compliance prior to implementation.  Several federal consumer compliance laws are described in the guidance that can be relevant to these programs.

The best practices section addresses the marketing and communications with consumers about overdraft protection programs, as well as features and operations of the programs.  Some of these best practices include: clearly disclosing fees; explaining the impact of transaction-clearing policies on the overdraft fees consumers may incur; disclosing the types of consumer banking transactions covered by the program; and monitoring program usage.  The agencies also advise insured depository institutions to alert consumers before a transaction triggers any fees; to provide consumers the opportunity either to opt-in or opt-out of the program; and to promptly notify consumers of overdraft protection program usage each time it is used.

The best practices section also includes guidance that financial institutions should not :

  • Market overdraft programs in a manner that encourages routine or intentional overdrafts;
  • Represent that the payment of overdrafts is guaranteed or assured if the institution retains discretion not to pay an overdraft;
  • Promote "free" accounts and overdraft protection programs in the same advertisement in a manner that suggests the overdraft protection program is free of charge; or
  • Include overdraft protection funds when disclosing  a single balance for an account.

National banks that do engage in these practices risk violating the Federal Trade Commission Act prohibition against unfair or deceptive acts or practices.

You may direct any questions to your supervisory office or OCC Compliance Division (202) 649-5470.

Emory W. Rushton
Senior Deputy Comptroller and Chief National Bank Examiner

*References in this guidance to national banks or banks generally should be read to include federal savings associations (FSA). If statutes, regulations, or other OCC guidance is referenced herein, please consult those sources to determine applicability to FSAs. If you have questions about how to apply this guidance, please contact your OCC supervisory office.

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