We recommend following the 2005 Joint Agency Guidance, which recommends that you notify customers when your bank decides to pay an overdraft, particularly because your bank charges an overdraft fee on those occasions. While the Joint Agency Guidance does distinguish between discretionary or ad hoc overdraft programs and more formal “overdraft protection” or “bounce protection” programs, it does state that it applies to both formal overdraft protection programs and “other methods of covering overdrafts.”

There are other important reasons to send notification to customers when your bank decides to pay an overdraft — a customer may have no other way of finding out whether an important payment has been paid or whether subsequent payments and withdrawals will further overdraft the account or be rejected due to a lack of sufficient funds in the customer’s account.

For resources related to our guidance, please see:

• Joint Guidance on Overdraft Protection Programs, 70 Fed. Reg. 9127, 9131 (February 24, 2005) (“While the Agencies are concerned about promoted overdraft protection programs, the best practices may also be useful for other methods of covering overdrafts.”)

• Joint Guidance on Overdraft Protection Programs, 70 Fed. Reg. 9127, 9132 (February 24, 2005) (“Promptly notify consumers of overdraft protection program usage each time used. Promptly notify consumers when overdraft protection has been accessed, for example, by sending a notice to consumers the day the overdraft protection program has been accessed. The notification should identify the date of the transaction, the type of transaction, the overdraft amount, the fee associated with the overdraft, the amount necessary to return the account to a positive balance, the amount of time consumers have to return their accounts to a positive balance, and the consequences of not returning the account to a positive balance within the given timeframe. . . .”)

• FDIC Compliance Examination Manual, Lending Section, Overdraft Payment Programs, page 13.8 (“The institution promptly notifies customers each time an overdraft payment program has been accessed. The notice identifies the date of the transaction, type of transaction, item amount, overdraft amount, fee imposed, amount necessary to return the account to a positive balance, amount of time the customer has to return the account to a positive balance, and the consequences of not returning the account to a positive balance within that time period. . . .”)