The Effects of Overdraft Fee Regulations: One Year Later

By John M. Floyd

One year after implementation of the Reg E opt-in requirement on overdraft fees for electronic transactions, most industry studies and media follow-up have focused on how the new rules have affected non-interest income.

What studies are not reporting yet are the additional costs incurred by financial institutions to maintain compliance with this and other new regulatory expectations. As a result of more increased regulatory scrutiny on consumer financial products, the need for compliance expertise has resulted in the added expense of new employees for many institutions.

Going forward, the focus on compliance will remain strong as additional consumer protection measures are implemented. And while this may seem overwhelming, a compliance expert can provide you with all of the tools and expertise you need to maintain compliance and ensure that your overdraft program is having a positive impact on your bottom line and your members’ financial stability.

Management Oversight is Key
The best way to stay ahead of potential problems is to ensure that your credit union’s board of directors provides appropriate oversight of your program. This should be consistent with the board’s ultimate responsibility for overall compliance and should include ongoing and regular supervision of program features and operations, including an annual program review.

Proper account monitoring and member communications are critical components of a compliant overdraft solution, as well as:

  • charging a reasonable overdraft fee and establishing limits on the number of transactions that will be subject to a fee, or providing a dollar limit on the total fees that will be imposed per day;
  • use of a de minimis threshold before an overdraft fee is charged in order to reduce risk related to charging fees that are disproportionate to the item being cleared; and
  • ensuring that check-clearing procedures operate in a manner that avoids maximizing member overdrafts and related fees through the clearing order.

With help from a compliance expert, you can rest easier knowing that new regulations are not costing your organization much-needed revenue and that your staff has the knowledge they need to manage a compliant program that provides financial management benefits for your members.


Questions? Contact Sales & Marketing Associate Craig Reed: 206.340.4789,

Posted in Compliance News.