Reg E Changes - Charging a Return Item Fee

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Question:

All of the discussions about Reg E and charging overdraft fees after 7/1/10 refer to paying an account into an overdrawn status. If we simply return the check, refuse the one-time POS or ATM transaction, can we charge a return item fee, typically the same amount as an overdraft fee?

Answer:

The rule does not affect your ability to charge a fee for returning unpaid a check or ACH transaction, or other transaction that isn't an ATM or one-time debit card transaction. You can't return an ATM or POS debit, but you can refuse an authorization request for either. The Regulation E rule does not address the question of declined transaction fees, but you will find this at the bottom of the middle column of page 59041 of the Federal Register document: "While the final rule does not address declined transaction fees, the Board notes that such fees could raise significant fairness issues under the FTC Act, because the institution bears little, if any, risk or cost to decline authorization of an ATM or one-time debit card transaction."

That, I think, is the regulatory equivalent of the Fed's drawing a line in the dirt and daring you to step across it. I don't think it's a wise choice for your bank to make.

First published on BankersOnline.com 2/22/10