Alert February 10, 2009

FRB Issues Regulation E Proposed Rule on Overdrafts

The FRB issued a proposed Regulation E rule which would limit the ability of a bank to assess an overdraft fee for paying ATM withdrawals and one-time debit card transactions that overdraw a consumer’s account, unless the consumer is given notice of the right to opt out of the payment of such overdrafts, and the consumer does not opt out. As an alternative approach, the proposal would limit the ability of a bank to assess an overdraft fee for paying ATM withdrawals and one-time debit card transactions that overdraw a consumer’s account, unless the consumer affirmatively consents, or opts in, to the bank’s payment of overdrafts for these transactions. In addition, the proposal would prohibit banks from assessing an overdraft fee if the overdraft would not have occurred but for a debit hold placed on funds in the consumer’s account that exceeds the actual amount of the transaction. Comments must be received on or before March 30, 2009. Click here for the proposal.