OD Fees, Authorized Positive

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Question:

When reading the Consumer Financial Protection Circular 2022-06, we are trying to understand if banks are not allowed to charge an overdraft fee on a transaction that was authorized positive and settled negative, regardless if they had OD privilege or not? In the Circular 2022-06, it states that overdraft fees can be deemed unfair acts or practices even when the financial institution complies with federal regulations including Regs Z and E.

Answer:

Regulation E prevents you from charging a fee for an overdraft resulting from an ATM or one-time debit card transaction unless you have complied with the prescribed procedures for obtaining the consumer's opt-in for overdraft services for such transactions, and the consumer has provided an opt-in.

The Bureau considers the charging of an OD fee on an ATM or one-time debit card transaction potentially unfair if it was authorized against a positive balance regardless of whether the consumer has opted in under section 1005.17. On the other hand, if the transaction was authorized against a negative balance because the consumer has opted in under 1005.17, I don't think the CFPB's Circular would apply.