Illinois Bankers Association Offers Tips for Consumers on New

0 Comments | U.S. Newswire, Jul 16, 2010

New Law Requiring Opting-in for Overdraft Protection Takes Effect

SPRINGFIELD, Ill., July 16 /PRNewswire-USNewswire/ — Illinois consumers and merchants need to be aware of a new federal rule that could lead to a significant increase in denied debit card transactions at a point of sale. All financial institutions are required to comply with this new rule.

On July 1, 2010, an amendment to the Federal Reserve Board’s “Regulation E” regarding electronic fund transfers went into effect. It requires consumers to opt-in to their financial institution’s overdraft protection program for ATM and one-time debit card transactions before overdraft fees may be assessed on the account. In the past, many financial institutions automatically enrolled their customers in an overdraft protection program for all types of transactions. Going forward, financial institutions will be forced to stop assuming the risk involved in covering overdrafts involving ATM and one-time debit card transactions, unless consumers choose to opt-in to this service. (These changes do not apply to overdraft programs involving checks and automatic bill payments.)

Failure to opt-in to your financial institution’s overdraft protection program means that an attempt to make a purchase with a debit card may be denied at the point of sale if you have insufficient funds in your account.

Overdraft protection programs offered by financial institutions provide consumers with protection against denied transactions. This service often involves a fee charged to the account holder to cover ATM and debit card transactions when there are inadequate funds in the account. Under the new rule, if an account holder has not opted- in to an overdraft program, and there are not enough funds in the account to cover an ATM or debit transaction, a fee cannot be charged and the transaction may be denied. For new accounts, the opt- in deadline is July 1, while existing account holders have until August 15 to opt-in, after which there can be no automatic overdraft protection offered until an opt-in request is received.

To help Illinois consumers better understand the new regulation and their options, the Illinois Bankers Association offers the following tips and information:

Options for Account Holders

Opt-in: If your bank has a practice of paying overdrafts for ATM and everyday debit card transactions, it will likely offer the option to opt-in to its overdraft protection program. Account holders will receive a notice with directions on how to opt-in. You can also call or visit your bank to help you better understand the process. If you decide to opt-in, you still will have the option to opt-out (cancel) at any time.

If You Don’t Opt-in: If you do not want to opt-in to an overdraft protection program, you do not have to do so. However, if you do not opt-in, your ATM or one-time debit card transactions may be denied if there are inadequate funds in your account. There often are other choices made available by financial institutions to protect against insufficient funds in an account. Many banks provide the option to link a checking account to a savings account or a line of credit
merchant account

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