Compliance Blog

Posted by Anthony Demangone

While I say this every year, I don't mind repeating myself.  How in the world did it become June this quickly?  If you know the answer to that, please let me know.  Bonus points for sarcastic answers.  (Feel free to leave them in the comments section of the blog.)

Overdraft Protection.  Last week, the Fed issued two final rules to clarify issues related to its two recent rulemakings that address overdraft protection.  Those two rulemakings were Regulation DD and Regulation E.  After the Fed issued those proposals, affected financial institutions had a lot of questions.  The Fed first issued a proposal to clarify those issues, and now they issued a final rule to "finalize" the clarifications.

(Note, Regulation DD is the Fed's Truth in Savings regulation.  NCUA has its own version, housed in Part 707 of its rules and regulations.  So, the Fed's final rule technically does not affect credit unions.  NCUA, however, does have a mandate to ensure that its rule is substantially similar to the Fed's.  For that reason, I tend to read Reg DD proposals and finals.  NCUA often follows up with similar rules.)

You can access the final rules here.  They'll be effective soon, with both rules becoming effective 30 days after the Fed publishes them in the Federal Register.

The rules closely track the proposal, and there really isn't anything in them that is earth-shattering.  Here are a few items of note:

• The Reg E clarification solidifies the Fed's position that the rule prohibits overdraft fees on ATM and one-time debit card transactions of any type without an opt-in.  Even if your credit union does not have a formal ODP program, you may not charge a fee when such a transaction overdraws an account, without an opt in from the member.  Even if you have no choice but to pay that transaction due to card network rules.  The Reg DD clarification finalizes the Fed's position that you may not tinker with the term "total overdraft fees" on your periodic statement fee table.
• There was some confusion on whether you had to include monthly and year-to-date (YTD) fee disclosures on a periodic statement if your credit union did not offer a formal overdraft protection program.  Here was the thinking: The section that requires monthly and YTD totals appears to be triggered only if your credit union has a formal ODP program as defined by the rule.  So, if you don't have such a program, you don't need monthly and YTD totals for NSF fees.  That was the thinking, anyway.  The final rule appears to give additional support to that argument.

The Board did not receive comment on the proposed amendments, which are adopted substantially as proposed. Section 230.6(a)(5) has been revised from the proposal to indicate that the aggregate fee disclosure is required on periodic statements "if applicable," because § 230.11(a) does not require aggregate fee disclosures when a consumer has not incurred any overdraft fees for the calendar year-to-date.  Final Reg DD clarification, p. 4.

I'll write an article with additional detail in the next Compliance Monitor.  Our Reg Affairs staff is working on an overview as well.

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Speaking of the NAFCU Compliance Monitor, the June issue is now available.