CFPB Unveils Prototypes of New Regulation E Overdraft Opt-in Disclosures

The prototype forms are designed to give consumers more clarity about the costs, risks, and benefits of participating in overdraft coverage.

8/8/17

The Consumer Financial Protection Bureau (CFPB) unveiled their new Regulation E “Know Before You Owe” Overdraft Opt-in Disclosure. They are currently testing four simple, one-page prototypes aimed at making the costs and risks of opting in to overdraft coverage easier to understand and evaluate. The CFPB developed the prototypes through interviews with consumers and is now testing them more widely.

Financial institutions already are required by Regulation E to provide consumers with certain overdraft information and use a model form. The new prototype model forms are designed to give consumers more clarity about this important financial decision, helping them to:

  • Understand the costs of opting in: The updated designs are aimed at helping consumers better understand opt-in costs by clearly laying out the size of the fees and when they can be charged. They are intended to clarify the institution’s overdraft polices. They also explain that the opt-in decision applies only to one-time debit card and ATM transactions, and that it does not affect overdraft on checks and other electronic transactions.
  • Evaluate the risks and benefits of opting in: The prototypes are intended to better assist consumers in making their own choice about whether they want overdraft services for most debit card transactions. They make clear that debit card and ATM overdraft is optional, and that consumers are not required to opt in.

These updated prototypes, if adopted, could also make it easier to provide customers with the disclosure form. The CFPB would make any new “Know Before You Owe” model overdraft form available on its website. Institutions would be able to plug their specific program information into the online form and then quickly download it for free. This new approach could make it seamless for banks and credit unions to use a new model form within their existing compliance systems, and easier to update their disclosures following future overdraft program changes.

As the CFPB tests these prototypes further and considers changes to existing requirements, the model form provided in the 2010 Regulation E overdraft opt-in rule continues to apply.

Prototypes of the “Know Before You Owe” Regulation E overdraft opt-in disclosure are available here.

Question of the Week

Can I charge any fees due to dormancy or inactivity, or stop paying interest on a dormant account?

Generally, the credit union cannot impose any charges due to dormancy or inactivity or stop the payment of interest.  However, the credit union can impose charges or stop paying interest in three situations. First, if there is a written contract between the credit union and property owner stating that the credit union can impose a charge or stop the payment of interest. Second, if the property is over ten dollars, the credit union, no more than three months before imposing the charges or stopping interest, gives written notice to the owner of the amount of charges at the last known address stating that charges will be imposed or payment of interest will stop. Third, if the credit union regularly imposes such charges or stops the payment of interest and does not regularly reverse or cancel them, or retroactively credit interest with respect to the property.

Related Links:

RCW 63.29.060

ORS 98.311

IDS 14-506

Legal Briefs

National Credit Union Administration (NCUA)

The NCUA announced that it is hosting its final round for CDFI qualifications. The final round for using the streamlined application process will run from August 7th through September 1, 2017.

Consumer Financial Protection Bureau (CFPB)

The CFPB announced that it has released four designs of the overdraft opt-in model form. The CFPB is asking for feedback regarding the forms and their effectiveness.

CFPB Director Cordray delivered prepared remarks on the CFPB’s Overdraft Press Call. Cordray discussed the reasoning behind the new forms and what the CFPB hopes to achieve with the new forms.

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The FRB is also requesting public comment on a proposal to better align its rating system for large financial institutions with the post-crisis supervisory program. The proposal will incorporate the changes made by the FRB since 2012, which focus on capital, liquidity, and the effectiveness of governance and controls.

The August issue of FedFocus is now available.

Federal Housing Finance Agency (FHFA)

The FHFA announced that it has reopened the comment period in order to gather additional input regarding issues facing qualified mortgage borrowers with limited English proficiency throughout the mortgage life cycle. The new deadline is September 1, 2017.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of July 31, 2017. The last update prior to this was July 28, 2017.

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.