Topic: Overdraft Protection Programs
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We offer customers a zero interest loan to pay back the amount of their deposit account overdrafts. The loans are payable in more than four installments. Is it a UDAAP violation, or would it violate any regulation, to require customers to make the first periodic payment when they sign the loan documents?
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No, we are not aware of any rule that would prohibit you from requiring the first month’s payment at the time of the loan closing. However, this practice could raise the possibility of being viewed by regulators or by customers as abusive. Because the loans are payable in more than four installments, Regulation Z applies,…
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We mail individual notices to customers on every instance of an overdraft. These notices are in addition to the Regulation E opt-in notice at account opening and the Regulation DD overdraft disclosures on their periodic statements. Are there any requirements or specific disclosures required for the individual overdraft notices?
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We recommend sending the notices described in the 2005 Joint Guidance on Overdraft Protection Programs. The Joint Guidance states that institutions should send separate overdraft notifications to customers and suggests seven items of information to include in those notifications: Promptly notify consumers of overdraft protection program usage each time used. Promptly notify consumers when overdraft protection…
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For our consumer deposit account customers, can we assess a flat fee when charging off accounts with negative balances (which may include overdraft/NSF fees), and then add the fee to the account balance? Currently, our deposit account agreements and disclosures do not mention a charge-off fee. Also, are there UDAAP issues?
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We recommend extreme caution before imposing a “charge-off fee” on a delinquent account, irrespective of whether such a fee is disclosed in your loan agreement. Such a fee, unrelated to any costs incurred for servicing the loan, would be ripe for attack under the principles of the federal and state UDAAP laws. It is not…
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We are changing several of our fees and plan to provide advance notice of our increased overdraft fees. Is there an advance notice requirement for cashier’s check fees and safe deposit box drilling fees?
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We agree that you should provide advance notice of an increase in overdraft fees, as Regulation DD requires you to provide advance notice of any change in terms that will adversely affect your customers at least thirty calendar days before the change takes effect. 12 CFR 1030.5(a)(1). We are not aware of any requirement for…
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Is there an Illinois state law regarding employee overdrafts?
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We are not aware of any Illinois law that would prohibit a bank employee from overdrawing his or her account. We also are not aware of any state or federal law that would prohibit a bank from applying its overdraft protection program to an employee, provided that the program otherwise complies with the requirements for overdraft…
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Can we offer overdraft protection programs on our deposit accounts for bank employees?
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We are not aware of any Illinois law that would prohibit a bank employee from overdrawing his or her account. We also are not aware of any state or federal law that would prohibit a bank from applying its overdraft protection program to an employee, provided that the program otherwise complies with the requirements for…