I am confused by the following:

I thought Reg E specifically exempts linked deposit accounts and LOCs from the Opt in requirement:

Did I miss something?

I believe they opted-in customers for the one time debit card transactions without getting approval from the customer - and then charged them, which violates the rule.

I understand that that's what they did, but I don't see how the rule is violated. The rule requires an opt-in before assessing a fee for paying an ATM or one-time debit card transaction "pursuant to the institution's overdraft service." As I quoted from the reg above, linked deposit accounts and LOCs are exempted from the definition of "overdraft service." That's what's confusing me.

Regions could have simply declined ATM or one-time debit card transactions that exceeded the available balance in both the checking and linked accounts. Instead, the bank paid those transactions then charged its customers a fee of up to $36.

They charged OD fees on the negative balance after depleting the linked accounts without an opt-in. The linked account is exempt only because the assumption is that you will only pay items up to the balance in the linked account and deny anything over that balance (and you don't normally charge a fee for the linked transfers), not overdraw the linked account as well or continue to pay ODs in the original account after linked funds were gone. That was the issue. They didn't get an opt-in for the overdrafts they paid after depleting the linked account.

Thanks for the explanation, Dani. I'm not saying that I agree with what Regions did, I'm just still trying to see how the opt-in was required. There still was no "overdraft service" that would have been subject to the opt-in.

Right. The fact that there was no service subject to an opt-in means they had no way to solicit an opt-in without violating UDAAP. Consequently, they couldn't charge the OD fee.

If you take out the linked accounts aspect, they basically charged OD fees on accounts with no overdraft service and no opt-in.

I guess I'm just not seeing it as a violation of the opt-in requirement. I can definitely see the UDAAP aspect, but that's not what the CFPB said. If there was no overdraft service, the overdrafts were just "normal" overdrafts, for which banks are allowed to charge (assuming they disclosed properly, but again, that's not what the CFPB cited them for). There was nothing to opt in to.

I appreciate your taking the time to try to help me understand.

They are normal overdrafts that can be charged unless the overdrafts were caused by ATM and one-time POS transactions that cannot be charged unless the customer opted-in.

The opt-in requirement is more than just getting the opt-in. It is also a prohibition to charge on covered transactions when no opt-in has been received. The opt-in violation occurred when they charged on items without a valid opt-in (one which they could not have solicited in the first place).

So, are you saying that the prohibition against charging fees for overdrafts caused by ATM and one-time debit card transactions goes beyond situations involving "overdraft services"? This is what I'm reading from the reg and that's why I thought the prohibition was only if there was an overdraft service involved, which, in this case, there wasn't.

You can't charge an overdraft fee on a POS/ATM without having the customer opt-in, regardless of whether or not you have an overdraft service.

If you have an ad-hoc treatment, you still can't charge that fee unless the customer has opted-in. Otherwise you simply deny the transaction and don't charge the fee.

Thanks, Norman. Can you please let me know where it says that in the reg so I can do further research?

Respondent transfers funds from the linked account into the Account to pay an ATM or one-time debit card transaction that would otherwise have overdrawn the Account.
The Working Group erroneously determined the Opt-In Rule did not apply to customers whose Accounts had Linked Coverage.


[There were two consequences to this determination. First, Respondent did not obtain Opt-Ins from its existing or new Linked-Coverage customers. Second, Respondent did not re-program its systems to prevent Linked-Coverage customers from being assessed Linked Overdraft Fees, i.e., fees for paying an overdraft due to an ATM or one-time debit card transaction that exhausted the balances of both the customer’s checking and linked secondary account.]

I read this as they charged a fee for transferring funds, preventing the overdraft and that such fee is considered an ODP fee. The transfer of funds paid ATM & debit card trans that would have overdrawn the acct had the transfer not occurred.

This is the part I'm struggling with. I can't find where the Opt-In rule applies to these situations since linked accounts and LOCs are specifically excluded from the definition of "overdraft service." Sorry to be so dense, but I just don't see it. Maybe I'd better just go back to TRID.

We currently charge a fee for sweeping from a linked account. The sweep will occur anytime the primary account needs funds (including for ATM/Debit Card transactions) but will not overdraw the linked account in the process. Are we not allowed to charge even our sweep fee when the money is transferred to cover a ATM/Debit transaction?

I think that you are covered if the overdraft service is the same for card, draft or ach transactions. Our savings accounts are overdraft for the checking. If the checking does not have enough for a draft, ach or a one time PIN based transaction it will transfer from Savings to Checking to cover the item and charge a $5 fee. And it will deny the transaction if there is not enough in the Savings to fully cover the transactions.
I've been through NCUA exams where they say as long it is the same across drafts, ACHs and card transactions it is allowable.
I have nothing but personal experience to draw on though.

1005.17(b) Opt-in requirement. (1) General. Except as provided under paragraph (c) of this section, a financial institution holding a consumer's account shall not assess a fee or charge on a consumer's account for paying an ATM or one-time debit card transaction pursuant to the institution's overdraft service, unless the institution:

(i) Provides the consumer with a notice in writing, or if the consumer agrees, electronically, segregated from all other information, describing the institution's overdraft service;

(ii) Provides a reasonable opportunity for the consumer to affirmatively consent, or opt in, to the service for ATM and one-time debit card transactions;

(iii) Obtains the consumer's affirmative consent, or opt-in, to the institution's payment of ATM or one-time debit card transactions; and

(iv) Provides the consumer with confirmation of the consumer's consent in writing, or if the consumer agrees, electronically, which includes a statement informing the consumer of the right to revoke such consent.





LOCs are not considered overdraft services which require an opt-in to charge interest (you already have a contract where the customer has agreed to pay interest on draws that cover the DDA overdrafts).

Linked accounts are not considered overdraft services where an opt-in is required because the assumption is that a bank will not pay ODs after the linked funding account is depleted. For example, my linked savings balance is $100.00 and my checking is overdrawn. The assumption is the bank will not fund anymore than the $100 that is in my savings account and anything over the $100 in my linked savings account will be denied by the institution. Regions funded the full $100 and overdrew the checking account beyond that transfer, then charged a fee. If that fee was on an OD caused by an ATM or one-time POS, it was prohibited because they didn't have an opt-in.

The exclusions from the definition of "overdraft service" in 1005.17(a) does not exclude them from 1005.17(b). Nowhere in 1005.17(a) or 1005.17(b) does it say that linked accounts and LOCs are excluded from the prohibition of charging in 1005.17(b).

1005.17(b) says the bank CAN NOT charge unless....you get an opt in. If you can't get an opt-in (for whatever reason) you CAN NOT charge an OD fee on ATM and one-time POS transactions.

As far as sweep fees, I think those are allowable because they should be addressed in your sweep agreement that sets up the linked accounts. The sweep agreement and any sweep fees noted in that agreement would be treated like an LOC note and contract for paying interest on LOC draws.

Thanks for providing my cite Dani. Was off at lunch.

I appreciate the explanation from everyone who tried, but the part that is providing the disconnect for me is what I bolded above from 1005.17(b). The way I read it (and obviously, I'm in the minority and just can't seem to get on the same page with the rest of you), 1005.17(b), which is the opt-in requirement, ONLY applies to assessing fees for ATM and one-time debit card transactions "pursuant to the institution's overdraft service, unles the institution . . ." If there is no overdraft service to begin with, 1005.17(b) doesn't apply - at least that's how I'm reading it. Again, I'm not disagreeing conceptually with the ethics of charging the fee, I'm looking at it technically from the reg's perspective and trying to understand. Dani, yYou state that the exclusion of linked accounts and LOCs from the definition of overdraft service in 1005.17(a) doesn't exclude them from 1005.17(b), but I think it does because 1005.17(b) only applies to assessing fees for ATM and one-time debit card transactions pursuant to the institution's overdraft service.

http://www.calbankers.com/compliance-bulletin/federal-reserve-board-clarifies-regulation-e-opt-rule

Maybe this ^^ will help??

One of the questions immediately raised after the 2009 final rule was released was whether institutions that have a policy and practice of declining ATM and one-time debit card transactions that would overdraw an account are subject to the fee prohibition in 12 CFR §205.17(b)(1). The Rule clarifies that such institutions are only relieved from the requirements of §§ 205.17(b)(1)(i)-(iv), including the notice and opt-in requirements. Sections 205.17(b)(1), (b)(4) (deleted and moved to comment §205.17(b)(1)), and related commentary are amended to clarify that the fee prohibition applies to all institutions.





The exclusions only relieve notice and opt-in requirements, but they are still subject to the fee prohibition.

So if you are charging a fee, don't you have some kind of a service? It may not be a formal service, but it is certainly an ad-hoc service.

1005.17(b) Opt-in requirement. (1) General. Except as provided under paragraph (c) of this section, a financial institution holding a consumer's account shall not assess a fee or charge on a consumer's account for paying an ATM or one-time debit card transaction pursuant to the institution's overdraft service,

A transfer fee for a sweep would not be prohibited, since sweeps are excluded from being an overdraft service. However, to assess overdraft fees for paying ATM/db card trans on either the sweep acct or the dep acct, the bank must have an opt in from the customer for the particular acct that is to be charged. That is my take on things.

I can understand your argument, Deena, and now you’ve made me confused (I also understand that what Regions did was ethically wrong, and they manipulated their systems to undermine customers). But Dani stated above:



My perspective, just worded a little differently than Dani’s:
I have a savings linked to my checking. The Bank offers a service to fund my overdrawn checking with $$ from my savings. This isn’t an overdraft service and I can be charged a fee for ATM/one-time debit card transactions that the Bank pays out of my savings. But – if I don’t have the funds available in my checking and savings to cover those ATM/one-time debit card transactions, and the Bank still pays those items, the bank has then provided an overdraft service. I’m not using funds from my savings account anymore. And I have not been given the opportunity to opt-in to this overdraft service. Thus, those transactions were prohibited and should have been declined.

The fine notice stated that “Regions could have simply declined ATM or one-time debit card transactions that exceeded the available balance in both the checking and linked accounts.” The way I read this, is that a fee was charged for ATM/one-time debit card transactions only after both, the checking and linked accounts were depleted.

[This isn’t an overdraft service and I can be charged a fee for ATM/one-time debit card transactions that the Bank pays out of my savings]

What kind of fee? You couldn't assess a fee for paying the ATM/db card trans, without opt-in. You could charge a transfer fee or similar fee for the transfer.

Right, sorry should have clarified - I could be charged a fee that has been established in the transfer account agreement/fee schedule. Not an overdraft fee.