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Compliance Challenge Reg E does not cover all accounts
WASHINGTON (4/14/10)--According to the Credit Union National Association (CUNA), overdraft rules that were issued under Regulation E, the Electronic Fund Transfer Act, only apply to “accounts established primarily for personal, family or household purposes,” not member business accounts. New Reg E rules will become effective on July 1, although accounts that were established before July 1 and have not opted-in to overdraft programs may be charged fees until Aug. 15. These rules prevent financial institutions from assessing overdraft fees on ATM and one-time debit card transactions without prior consumer consent. Credit unions that do not have formal overdraft programs are also covered by this opt-in requirement if they charge any fees for ATM and one-time debit card overdrafts. In this month’s Compliance Challenge, CUNA adds that “trust and estate accounts should also be excluded” from the Reg E requirements, as the rule only applies to “natural persons.” “Therefore, it is a business decision for the credit union to decide how it will handle overdrafts of these accounts,” CUNA said. Credit unions may also decide whether or not they will “provide the opt-in consent option to all members with ATM and debit cards… it’s a business decision of the credit union to whom it wants to provide the overdraft protection service within its membership,” CUNA said. CUNA has recently encouraged the Federal Reserve to alter the Reg E rules to allow credit unions and others to charge members an overdraft fee in 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. For the full Compliance Challenge, use the resource link.


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