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Fed to clarify final rules under Regs E DD
WASHINGTON (2/22/10)--The Federal Reserve on Friday released a series of proposals that would clarify the portions of Regulation E, Electronic Fund Transfers, and Regulation DD, Truth in Savings, that address overdraft services. The proposals are meant to “provide further guidance regarding compliance with certain aspects of the final overdraft rules,” with a particular emphasis on portions that prohibit financial institutions from “assessing overdraft fees without the consumer's affirmative consent.” The proposal seeks to affirm that this prohibition “applies to all institutions, including those with a policy and practice of declining ATM and one-time debit card transactions when an account has insufficient funds.” According to the Fed, the Reg E proposal would clarify that the prohibition on assessing overdraft fees without the consumer's affirmative consent applies to all institutions that charge such fees for ATM and one-time debit card overdrafts. 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. The Fed also clarifies that the fee prohibition applies if a credit union falls under the regulation's exception for institutions that have a policy and practice of declining ATM and one-time debit card transactions when an account has insufficient funds. The Reg E proposal also addresses sustained overdraft, negative balance, or similar fees associated with paying overdrafts and clarifies that an institution is not prohibited from assessing a fee when a negative balance is attributable in whole or in part to a transaction that is not subject to the fee prohibition. The Fed’s proposed amendments to Reg DD clarify the application of the rule to retail sweep programs and the required use of the term “total overdraft fees” for overdraft fee disclosures. The Fed has also added references to the Reg E amendments into Reg DD. The proposals, which will be open for comment for 30 days after they are published in the Federal Register, would also make certain technical corrections and conforming amendments, the Fed added. For more on the proposals, use the resource link.
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