After reviewing the Electronic Fund Transfer Act (EFTA) and Regulation E, which apply to overdraft programs dealing with electronic fund transfers (EFTs)), and discussing with attorneys at the OCC and the Federal Reserve Board, we do not believe it would be possible to draft an opt-in notice that would comply with Regulation E.
Regulation E requires that all checking account customers opt-in to overdraft protection, even if the bank does not plan to cover overdraft transactions. See Supplement I to Part 205 — Official Staff Interpretations, Pt. 205.17(b)-1 (2011). Without a valid opt-in, banks may not charge any overdraft fees. 12 C.F.R. 205.17(b); OCC Bulletin 2010-15.
However, it would be very difficult to revise the model opt-in form for your proposed overdraft policy. The model form, A-9, allows customers to authorize a bank to pay overdrafts while agreeing to overdraft fees charged by the bank. You would have to rewrite several parts of the model form in order to avoid misleading customers, but you are required to use a form that is “substantially similar” to the model. 12 C.F.R. 205.17(d).
As explained by a Federal Reserve staff attorney, the Board considered including language in model form A-9 to explain inadvertent overdraft policies. However, they decided not to use such language following extensive consumer testing. The attorney stated that banks with second-chance checking accounts had responded in three ways: (1) most banks stopped charging overdraft fees on EFTs; (2) some banks limited debit card use on such accounts; and (3) a minority of banks allowed second-chance customers to authorize EFT overdraft fees on such payments using the model A-9 form. If your bank does undertake to revise the model opt-in form, we highly recommend that you consult legal counsel in doing so.
Other Issues
The OCC (together with the FDIC, FED, and NCUA) issued joint agency guidance on overdraft protection programs with various safety and soundness standards and best practices in 2005, and the OCC recently published a proposed supplemental guidance in 2011. If your overdraft payments will truly be ad hoc, discretionary accommodation payments, the 2011 proposed guidance does not apply to your program. However, the proposed guidance still may assist you in controlling reputational and compliance risks associated with your overdraft practices.