Understanding Federal Regulations for Overdrafts

New Federal Regulations give consumer debit and ATM card users additional options regarding overdrafts. Under changes in the Federal Reserve’s Regulation E, which enforces the Electronic Funds Transfer Act, banks, credit unions and other financial institutions must offer clients the ability to make decisions about overdraft services for transactions made with debit or ATM cards.

There are 2 kinds of “overdraft services.”

1. Standard Overdraft Services refers to the flat fee that we charge to cover each occurrence of an overdraft. The fee is currently $37.  If your account is overdrawn for seven (7) consecutive calendar days, we will charge an additional $5.00 per day. You have the option to “Opt In” to the Bank’s Standard Overdraft Services in order for an overdraft resulting from a debit or ATM card transaction to be paid and a fee to be assessed. If you do not “Opt In,” an overdraft resulting from a debit or ATM transaction will not be paid and no fee will be assessed. Overdrafts from check and online bill pay transactions will not be affected and Standard Overdraft Services fees will continue to apply.

2. Overdraft Protection Services refers to overdraft lines of credit or links to savings accounts to cover overdrafts. Depending on what type of overdraft protection and type of checking account you have, there may be fees for these services, but they are generally less costly than standard overdraft fees.

How could this impact me?

If you do not “Opt In” to standard overdraft service, ATM and one-time debit card transactions will be declined if you do not have sufficient funds in your account at the time of the transaction. For example, if you went to the grocery store and attempted to pay using your debit or ATM card and did not have sufficient funds, your transaction would be declined.

Example-“Opting In” versus “Opting Out” of accounts with the overdraft service

For consumer accounts, the following example shows how items might be handled differently between a client who “Opts In” or “Opts Out” of overdraft services for ATM and one-time debit card transactions.