Is signature needed for OD transfer service?

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Question:

Is signature needed for OD transfer service? Our "overdraft" product does not qualify as overdraft under 12 CFR 1005, as it's simply a transfer between the consumers accounts. The consumer receives two free transfers per year but is subsequently charged $0.50 for each transfer thereafter. Is the consumer's signature required to link his/her deposit accounts for this "overdraft" service?

Answer:

Those transfers are not considered electronic fund transfers under Regulation E (see 12 CFR 1005.3(c)(5)(i)), so there's no Regulation E requirement for an authorization. However, I'd recommend a brief agreement that recites the account numbers, the purposes and conditions of the transfers (including any minimum transfer amount), the customer's acknowledgment that such transfers are counted toward the regulatory maximum of six per month or similar period of at least four weeks, any fee for the transfer, and that if there are insufficient funds in the "funding account" a transfer will not be completed. You'll also want to indicate whether you'll permit the consumer to overdraw the checking account at an ATM or a point of sale using the funding account as a "pad" for the balance. I'd recommend that the consumer receive a copy of that agreement and acknowledge the receipt with a signature.