OK, I'm just sitting here reading the new UDAP overdraft services proposal in the Federal Register. While I don't think my bank will be largely affected, since we don't have a bounce protection program (unless we get snookered by the poorly written definition of "overdraft service"), I'm flabbergasted by some of the things I'm reading!

Don't get me wrong, I think many banks implemented questionable programs, and now the piper wants payment, but the writers of the propsal seem to think consumers bare no responsibility for their own finances!

Case in point: In arguing the reasons why overdraft programs violate UDAP, the writers of the proposal state:

"Injury is not reasonably avoidable. It appears that consumers cannot reasonably avoid this injury if they are automatically enrolled in an intitution's overdraft service without having an opportunity to opt out. Although consumers can reduce the risk of overdrawing their accounts by carefully tracking their credits and debits, consumers often lack sufficient information about key aspects of their account. For example, a consumer cannot know with any degree of certainty when funds from a deposit or a credit for a returned purchase will be made available."

WHAT?! Are you kidding me? Now consumers can't be expected to know how much money they have and spend within their means?! And that business about availablity.... hello Reg CC!

Grrr, it just burns my biscuits. Enough ranting, maybe.

Rebekah, I believe that if you pay overdrafts - even without a program - that you will now be covered.

What's so foolish to me is the fact that with or without the program the customer will be charged a fee whether we pay the check or send it back. For us, the fee is the same. What possible difference does it make if they are enrolled in an overdraft protection program or not?

Writing checks for which you have no funds is a crime in most states. They're getting off easy simply paying a fee.

That's what I'm afraid of, Waldensouth. I think it comes down to the interpretation of the definition of "Overdraft Service", which is proposed as:

"A service under which an which an institution charges a fee for paying a transaction (including a check, point-of-sale debit card transaction, ATM withdrawal and other electronic transaction, such as a perauthorized electronic fund transfer or an ACH debit) that overdraws an account. The term covers circumstances when an institution pays an overdraft pursuant to a promoted program or service or under an undisclosed policy or practice and charges a fee for that service." Lines of credit and sweeps are exempted.

I think this definition is muddy enough to be read that all overdraft payments are an "overdraft service". Ugh.

I'm looking forward to John's take on it at his webinar on July 9th. I'll be sharpening my pencil to write a comment letter right after it ends!

You have the basis for an excellent comment letter. Please write it. If the proponents are wrong, just tell them they are wrong and why. If they are using a shotgun when they need a rifle tell them that too.

The "poor consumer" dogma has always been easy to dissect. Now that comment letters are readily available to all who care to read them, I think they have much more impact.

I spent some time with this proposal yesterday as well. I also went out & read some of the comment letters that have been submitted thus far and, Rebekah, I am with you on this one. The comment letters from consumers express things like "consumers are less likely to write down each purchase" due the the increased use of debit cards versus checks. And that's our fault because why? And like Walden said, do they not realize they will still be charged return item fees AND merchant returned check fees AND possilby late charges if we send the item back instead of paying it? This topic burns me as well. And yes, my comment letter is in the works & I encourage everyone else to do the same.

Comments are due by...?

I believe it is July 18th

As far as the consequences of opting out, the proposal would permit the disclosure to include optional information such as the fact that you'll assess a check bouncing fee and the merchant may impose a returned check fee, and they may incur late fees imposed by the payee, yada yada yada.

However, I am really ticked that the Reg AA proposal includes that "Injury is not reasonably avoidable" claptrap as justification for deciding everyone needs to get a detailed opt-out notice (multiple times, for crying out loud). What happened to waiting until funds are available before writing a check or buying groceries? What about the fact the internet banking gives consumers unprecedented access to available funds information? Why in the heck do we have the other disclosure rules (like holds notices under Reg. CC)? Are we to assume that the dumbing down of the American consumer is complete? That customers are no longer to be responsible for managing their own checking accounts?

I wonder whether there will be banks that will just say, "to heck with it. No more overdrafts. Bounce 'em all"! I wonder how many customers will switch their opt-out options back and forth each time something doesn't go quite the way they prefer. I wonder how long it will take a bank to give the boot to such a customer.

But mostly, I just wonder.

Loved that, John!

Here is the link to the one I submitted, in case any of you are interested. I hate to weed through all those comment letters out there!

Great comments!

"I wonder whether there will be banks that will just say, "to heck with it. No more overdrafts. Bounce 'em all"

I really don't think that is far from the truth if this is adopted as proposed.

Interesting....In Canada, banking is a privilege. Being financially responsible. FDCI was just in and we were talking about this. The FDIC rep thought this was quite a concept. For real!

In the UK, banks can push responsibility off on their depositors who don't use the internet responsibly, too. On the whole, the U.S. is considerably more protective of consumers on many levels.

Is there any word on the status of this proposal?

None