Concerning Reg E Amendments

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Question:

As long as our system can support it, are we allowed to offer an opt-in (courtesy pay) on just debit transactions, but not ATM or PIN POS transactions? Our opt-in will be to a courtesy pay program which will allow the member's debit transaction to be authorized for up to $300 above their available limit. Can we set criteria to qualify for the courtesy pay, such as requiring the member to be current on all loans, be eighteen years of age or older, maintain a direct deposit of $100, bring negative balance current within a week, etc? Do we need to have a separate courtesy pay program for ATM/Debit transactions, or can we have one program, which covers all types of transactions, including checks, ACH, ATM, Debit, etc., as long as the member opts in for the courtesy pay for ATM/Debit transactions?

Answer:

As I understand your question, your credit union would not authorize and pay ATM or PIN-authenticated debit card transactions, but would allow debit card holders to opt into a courtesy pay program that would cover signature-authenticated transactions. I don't believe that the requirements of Regulation E's Section 205.17 would prohibit it.

Establishing eligibility criteria for a courtesy pay program is a risk-management decision, and probably provides more credibility to the program itself. I don't see anything wrong with the criteria you've described.

Your last question, however, deserves comment. First, you are not required to have a courtesy pay program for ATM or one-time debit card transactions, but if you offer courtesy pay for them (or just for signature-authenticated debit card transactions), it must be optional, and cannot be bundled with an overall program covering checks, ACH and other transactions, so that a member's failure to opt into the coverage for card transactions prevents his or her participation in courtesy pay for the other transactions. That would be an example of prohibited conditioning the member's access to courtesy pay for non-card transaction on the member's opt-in to coverage for card transactions. [Section 205.17(b)(2)]

First published on BankersOnline.com 6/07/10