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CUNA urges Fed to change Reg E interpretation
WASHINGTON (4/1/10)--The Credit Union National Association (CUNA) has urged the Federal Reserve to consider changing its interpretation of the recent Regulation E overdraft rules to allow credit unions and others to charge members an overdraft fee in certain, specific situations, even if the member does not opt-in to the program, as otherwise required under these new rules. These specific situations include instances where intervening transactions reduce the account balance after the debit transaction is authorized, but before it is paid, and when merchants request authorization for a transaction in an amount less than the actual total of the purchase, according to CUNA. Card network rules require credit unions and others to pay these transactions, even if they result in an overdraft and regardless of whether the member opts-in. CUNA also recommended that the Fed further clarify any potentially murky sections of its upcoming rules by publishing and maintaining a list of frequently asked questions. These overdraft rules were issued under Regulation E, the Electronic Fund Transfer Act and become effective on July 1, although fees may be charged without the opt-in for current accounts until August 15. The comment letter responds to the Fed's recently proposed clarifications to these rules that prohibit fees for overdrafts in connection with ATM and one-time debit card transactions, unless the consumer agrees or “opts-in” to these fees. The Fed also issued proposed clarifications to the recent changes to Regulation DD, the Truth in Savings Act (TISA), that impose disclosure requirements for overdraft plans, which also becomes effective on July 1. This proposal would clarify provisions with regard to the disclosure of overdraft and returned-payment fees. While Regulation DD does not apply to credit unions, the TISA requires the National Credit Union Administration (NCUA) to issue substantially similar rules. CUNA called on the Fed to allow credit unions and other financial institutions to refer to overdraft and returned-payment fees as “Total Overdraft Fees for Paid Items” instead of “Total Overdraft Fees” on their periodic statements, “which will further distinguish the paid overdraft items from items that are returned unpaid and that are also required to be disclosed.” For the full comment letter, use the resource link.
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