Reg E and Recurring Overdraft Fees

The Federal Reserve Board has issued proposed "clarifying" amendments to make the answer clear, but here's the gist of the requirement (or prohibition):

If, on or after July 1, 2010 (August 15 if the account was opened before July 1, 2010) the bank has not received an affirmative consent to the bank's overdraft service with respect to ATM and one-time debit card transactions from a consumer covering the account in question, the bank can assess no overdraft fee of any kind resulting from its payment of an ATM or one-time debit card transaction that overdraws the account. Assume, for example, the bank imposes a $5 per day fee when an account has been overdrawn more than five business days. On September 7, 2010, the bank pays a one-time debit card transaction of $25 that overdraws the account by $15 (because the transaction, for the purchase of gasoline, was authorized for only $1). On September 9, 2010, the bank pays an ACH debit of $35 that brings the balance to $50 overdrawn, and the bank imposes a $25 overdraft fee for that transaction, bringing the balance to $75 overdrawn. No further activity posts. The account is overdrawn for the 6th business day on September 14, but the bank cannot impose a continuing overdraft fee on that day because the account was overdrawn on the 7th and 8th of September only by the debit card transaction. If no further transactions post, the bank will be able to impose its $5 continuing OD fee on September 16, the 6th business day after the posting of the ACH debit.

To make continuing overdraft fees work in an account without an opt-in, I think you also have to have the ability to apply any credits to the account first to wipe out overdrafts due to ATM and one-time debit transactions. If you aren't able to manage the continuing fee to avoid assessing fees on portions of the OD balance due to ATM and one-time debit card transactions, you will probably have to stop assessing them altogether on any card-accessible account that hasn't been opted in.

First published on BankersOnline.com 6/28/10