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Fed adopts final overdraft protection rule for effect July 1, 2010

Fed Adopts Final Overdraft Protection Rule

The Federal Reserve Board today adopted final rules – effective July 1 -- that prohibit financial institutions from charging consumers fees for paying overdrafts on automated teller machine and one-time debit card transactions, unless a consumer opts in to the overdraft service for those types of transactions. The final rule comes after months of criticism in the media and Congress of bank overdraft policies.

Before opting in, the consumer must be provided a notice that explains the financial institution's overdraft services, including the fees associated with the service, and the consumer's choices. The final rules include a model opt-in notice.

Financial institutions are prohibited under the rule from discriminating against consumers who do not opt in, meaning they must provide these consumers with the same account terms, conditions, and features -- including pricing -- that they provide to consumers who do opt in.

The board said its consumer testing shows that most consumers prefer not to be enrolled in overdraft services for ATM and one-time debit card transactions unless they have opted in. The testing also affirmed, however, that most consumers want overdraft services to cover important bills. This finding is consistent with consumer surveys ABA has conducted.

Read the Fed's press releaseRead the final ruleRead the model disclosure form. 

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