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Reg E needs hybrid approach to opt-ins CUNA
WASHINGTON (3/31/09)--The Credit Union National Association (CUNA) generally supports proposed changes to the Federal Reserve Board’s Regulation E that would impose restrictions on overdraft protection plans as they pertain to automated teller machine (ATM) and one-time debit card transactions. The Fed proposal will not apply for other types of transactions, such as checks, automated clearinghouse (ACH) transactions, and preauthorized electronic funds transfers. CUNA said in a comment letter that it backs efforts to provide more consumer protections for electronic funds transfers, but urged the regulator not to impose significant operational burdens on credit unions and other financial services providers. The Fed plan proposes an “opt-in” approach for overdraft plans, in which fees could not be charged unless the consumer chooses to participate in the plan. That approach, CUNA wrote, should be modified to a “hybrid” approach to avoid burdens to financial institutions, according to CUNA. Financial institutions should be allowed to use an opt-out system for existing accounts, while the opt-in alternative could be required for new accounts. “This will alleviate burdens for credit unions in making this transition, while insuring that the opt-in alternative will become more prevalent over time as new accounts are opened,” CUNA said. CUNA used the opportunity of the comment letter to reiterate its strong support of overdraft protection plans. Those plans provide a valuable service for consumers, especially for check transactions, as the overdraft fee is often equivalent to the returned-check fee and the use of the overdraft plan will avoid additional merchant fees and other adverse actions, CUNA said. CUNA also agreed with the Fed that financial institutions should not require consumers to choose overdraft services for checks, ACH, and other transactions on the condition that they elect this service for ATM and one-time debit card transactions. “However, these and other operational aspects of the rule will require significant time to implement and, therefore, credit unions will need at least one year after the proposal is finalized to implement these changes and compliance with this rule should not mandatory until that time,” the CUNA letter said.


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