At the ATM, the only way a customer can access their Courtesy Pay is if the machine displays two balances, the true one and the inflated one, correct? But what about on the debit side? If a customer is at the grocery, can we approve the transaction based on the inflated amount? Thanks!

1. Incorrect. Depending on the system, the customer may be able to access overdraft funds without the display of the "puffed" balance.

2. On the debit side, whoever does the authorization of the transaction must have access to the inflated balance.

After 7/1/10, you'll need to have received an opt-in under Reg E §205.17 to do either.

Thanks John. So on the debit side, as long as we transmit the inflated balance (assuming member opted in) that is all there is to it? The customer swipes card and it can be approved automatically based on higher balance? No special screen saying you are going into overdraft...

John- Our practise is to decline NSF POS/ATM transactions, so we are not sending out opt-in notices. However, customers who have a sweep tied to their checking from another account have access to the inflated balance (ie., balance of both accounts) at the ATM and point of sale.

Must we send an opt-in in this scenario?

In the Fed's most recent FAQ on the overdraft fees issue, the 2005 Best Practices (ODP Guidance) were mentioned, and the Fed said it still encourages those practices (that haven't been superseded by regulations). One of those was notifying a customer when he/she is requesting an ATM transaction that would overdraw, and asking if the consumer wishes to continue.

First, a question of you: What happens when your customer taps out the other account? Do you then decline the transactions? If so, no opt-in, but you'll have to make sure you don't hit them with an overdraft fee if you get stuck with a card transaction you have to pay.

In the unlikely event that you'd approve the transaction even though there's not enough in the account (and the transfer account is also empty), and you'll charge an overdraft fee, then you're providing an overdraft service when the overdraft protection isn't available. That scenario would call for an opt-in.

To answer your questions, we decline when the other account gets tapped out, and are not assessing overdraft fees on any POS transactions.

Thanks for your response!

I am questioning the "Courtesy Pay” if this is a disclosed program or not?

Our bank does not have a formal program but implements an approval balance at the POS and ATM that includes a "Courtesy Pay" discretionary approval. Can we still do this option if we get an opt-in form?

You can still do it if you don't get an opt-in form. You just can't charge an NSF/OD Fee should the transaction slip through without an approval (off-line or under floor limits) unless you get an opt-in.

Let's restate what GoGreen has asked. If you have an approval balance used for authorization of ATM and POS transactions and that balance includes a "courtesy pay" padding amount, you will occasionally be approving an ATM or POS transaction that overdraws an account. That's OK under the OD Fee rule in Regulation E if you don't assess an overdraft fee for those transactions if the account hasn't been "opted in."

Of course for non-opted-in accounts, you also will not be able to assess an OD fee for an ATM or POS transaction that sneaks in for whatever reason and overdraws the account.

If you send the opt-in disclosure (A-9-like form), receive an opt-in, and provide a confirmation, you will be able to impose an OD fee for ATM and one-time debit card transactions.