Date: April 12, 2010
Description: Opt-In Requirements and Related Marketing Issues
This bulletin is intended to provide guidance to national banks on implementation of a final rule establishing new opt-in requirements relating to overdraft protection programs. This bulletin transmits and summarizes the final rule.
This bulletin also reminds national banks that any marketing or supplementary materials associated with the opt-in procedures – or their overdraft protection programs generally – must comply with Federal Trade Commission Act (FTC Act) standards. Marketing must not be unfair or deceptive to consumers, and should provide consumers with timely, clear, accurate, and balanced information that will promote informed decision making.
On November 17, 2009, the Board of Governors of the Federal Reserve System (Board) published in the Federal Register a final rule (Rule) that amends Regulation E, 12 C.F.R. Part 205, to address overdraft protection programs.1 The Rule generally prohibits financial institutions from assessing fees for paying ATM and one-time debit card transactions that overdraw consumer accounts unless the consumer affirmatively consents, or opts in, to the overdraft protection program.2
Effective Date and Mandatory Compliance Dates
The Rule became effective on January 19, 2010. However, compliance does not become mandatory until July 1, 2010. The Rule applies to new and existing accounts. For accounts opened before July 1, 2010, financial institutions may not assess any overdraft fee on or after August 15, 2010, if the consumer has not opted in. For accounts opened on or after July 1, 2010, financial institutions may not assess any overdraft fee unless and until the consumer has opted in.
Scope of Rule
The Rule applies to overdraft protection programs in which the financial institution assesses a fee against a consumer’s account for paying an ATM or one-time debit card transaction when the consumer does not have sufficient available funds in the account to cover the transaction.3 However, the Rule does not apply to the payment of overdrafts pursuant to:
- Any line of credit subject to Regulation Z;
- Any service that transfers funds from another deposit account of the consumer; or
- A line of credit or other transaction in a securities or commodities account that is exempt from Regulation Z.
In addition, the notice and opt-in requirements of the Rule do not apply to an institution that has a policy and practice of declining to authorize and pay any ATM or one-time debit card transaction when it has a reasonable belief that the consumer does not have sufficient available funds to pay the transaction. However, even if the institution has such a policy and practice, it still may not assess a fee for paying ATM or one-time debit card transactions if the consumer has not opted in.4
Notice and Opt-In Requirements
Financial institutions may assess fees for paying ATM or one-time debit card transactions pursuant to an overdraft protection program if the following conditions are met:
- The institution provides the consumer with a written notice (or electronic notice, if the consumer agrees), segregated from all other information, describing the overdraft protection program;
- The institution provides a reasonable opportunity for the consumer to affirmatively consent, or opt in, to the program for ATM and one-time debit card transactions;
- The consumer affirmatively consents, or opts in, to the payment of ATM and one-time debit card transactions; 5 and
- The institution provides written confirmation (or electronic confirmation, if the consumer agrees) of the consumer’s consent and includes a statement informing the consumer of the right to revoke such consent.
If two or more consumers jointly hold an account, the consent or revocation of one consumer is treated as applying to the account, and will bind all holders of the account.
Form of Notice to Consumer
The notice must be substantially similar to a model form prescribed by the Board and included in Appendix A to the Rule. The notice must include the following information, and may not contain any other information that is not specified in or otherwise permitted by the Rule:
- A brief description of the overdraft protection program, including the types of transactions for which a fee may be imposed for paying an overdraft;
- The dollar amount of any fees to be assessed, including any daily or other fees, and, if the amount of the fee is determined on the basis of any variables (such as the amount of the overdraft or the number of times the consumer has overdrawn the account), the maximum fee that may be imposed;
- The maximum number of fees that may be assessed per day, or, if applicable, that there is no such limit;
- An explanation of the consumer’s right to affirmatively consent to the payment of overdrafts for ATM and one-time debit card transactions pursuant to the overdraft protection program, including methods that the consumer may use to opt in; and
- If applicable, a statement that the financial institution offers alternative methods of covering overdrafts, such as lines of credit or account transfer services. 6
At the option of the financial institution, the notice may also include other information specified in the Rule, such as a description of any right to opt in to or opt out of the payment of overdrafts for other types of transactions (like check or ACH transactions).
Timing, Duration, and Revocation of Consent
The consumer may opt in at any time. Similarly, the consumer may at any time revoke the decision to opt in. The consumer’s consent continues until the consumer revokes it or the financial institution terminates the overdraft protection program.
Other Account Terms, Conditions, and Features
The financial institution must provide accounts with the same terms, conditions, and features to consumers who opt in and to consumers who do not opt in (other than the overdraft protection program for ATM and one-time debit card transactions). In addition, the institution may not condition the payment of other types of overdraft transactions (e.g., checks) on the consumer’s opting in to the payment of ATM and one-time debit card transactions pursuant to the overdraft protection program.
Additional Communications with Consumers
In the Supplementary Information to the Rule, the Board specifically acknowledged that institutions may provide additional information to customers about their overdraft protection programs – beyond the prescribed opt-in notice – so long as this information is set forth in a separate document.7
The OCC recognizes that national banks offering overdraft protection programs may wish to provide such additional information to their customers. Any such additional information should provide consumers with timely, clear, accurate, and balanced information that will promote informed decision making. Further, national banks must take steps to ensure that any such additional information is provided in a manner that does not constitute an unfair or deceptive practice within the meaning of the FTC Act.8
Accordingly, any such additional communications with consumers should not contain representations or omissions that are likely to mislead consumers about the consequences of opting in (or failing to opt in) or about the overdraft protection program in general. In particular, such communications should not contain misleading representations or omissions about:
- the types of transactions that would be affected by opting in (or failing to do so);
- the consequences of opting in or failing to opt in for transactions that are affected; or
- the fees or charges that may be incurred if one opts in or declines to do so.
For example, such additional communications should not suggest that the failure to opt in would affect check or recurring debit transactions; that, if the consumer fails to opt in, ATM and one-time debit card transactions may not be authorized and paid even if there are sufficient available funds in the consumer’s account; or that, if the consumer does not opt in, ATM and one-time debit card transactions that are declined would result in fees being charged to the consumer.
National banks also should carefully consider the compliance, reputation, and other risks that would be presented by targeting these additional communications to consumers that have previously used the overdraft protection program on more than an occasional, inadvertent basis. More generally, national banks should continue to take steps to conform their overdraft protection programs with the best practices set forth in the interagency Joint Guidance on Overdraft Protection Programs.9
Questions concerning this bulletin may be directed to the Community and Consumer Law Division at (202) 649-6350, the Compliance Policy Department at (202) 649-5470, or the appropriate supervisory office.
Ann F. Jaedicke
Deputy Comptroller for Compliance Policy
1 74 Fed. Reg. 59,033 (Nov. 17, 2009).
2 The Board recently published a proposed rule amending Regulation E and the official staff commentary to clarify certain aspects of the Rule. 75 Fed. Reg. 9,120 (Mar. 1, 2010). Seehttps://www.occ.gov/news-issuances/federal-register/75fr9120.pdf. Among other things, the proposed rule would clarify that the fee prohibition encompasses not only overdraft fees assessed on a per-transaction basis, but also any daily, sustained, or continuous overdraft fees, negative balance fees, and similar fees and charges.
3 Financial institutions may pay ATM and one-time debit card overdrafts without assessing any fee.
4See 75 Fed. Reg. at 9,121.
5 The consumer’s consent need not be in writing.
6 Under the Rule, the financial institution may, but is not required to, list those methods.
7 74 Fed. Reg. at 59,047, note 39.
8See OCC Advisory Letter 2002–3—Guidance on Unfair or Deceptive Acts or Practices, March 22, 2002. A practice is deceptive if there is a material representation, omission, act, or practice that is likely to mislead consumers and would be deceptive from the perspective of a reasonable consumer. See Federal Trade Commission, Policy Statement on Deception, October 14, 1983. A practice is unfair if the practice causes or is likely to cause substantial consumer injury; the injury is not outweighed by benefits to consumers or to competition; and the injury cannot reasonably be avoided by consumers. See Federal Trade Commission, Policy Statement on Unfairness, December 17, 1980.
9 70 Fed. Reg. 9,127 (Feb. 24, 2005).