Answer:
Probably the most often-cited support is a 5/4/1979 Staff Opinion letter published in the Federal Reserve Regulatory Service at Locator Number 3-1081:
"The negative balance on a zero-balance account is an overdraft and therefore an extension of credit, unless the negative balance qualifies as an inadvertent overdraft. This is unaffected by the existence of funds in a second account of the account holder, unless the bank has written authorization from the account holder to charge the second account and that account is actually charged in the amount of the overdraft. However, a negative balance outstanding for 24 hours or less would not constitute an overdraft where funds are being automatically or electronically deposited or transferred.
"A check drawn and paid against uncollected funds is neither an overdraft nor an extension of credit. It becomes an extension of credit if it is returned to the bank uncollected and does not qualify as an inadvertent overdraft."
There is nothing in the regulation itself that says that the transfers under the line of credit or from another account has to be completed on the same business day as the overdraft is created. In some banks, such transfers are routinely made on a manual basis, and that would mean doing so on the business day following the date of the overdraft.
First published on BankersOnline.com 8/10/09
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