Credit unions and other financial institutions can't charge overdraft fees at ATMs or on one-time debit card transactions unless the consumer consents, or opts in, as a result of rules that the Federal Reserve approved today.
The financial institution must provide a notice explaining the services offered add the fee structure to the consumer before the consumer makes a decision. Also, the credit union must offer the same account terms to all members, whether or not they opt in.
The rules, which take effect next July 1, do not apply to checks or to pre-payment arrangements.
"Overdraft fees can be costly," said Fed Governor Elizabeth A. Duke, the chair of the Board's Committee on Consumer and Community Affairs. "Our rule will help consumers better understand the terms and conditions of overdraft services and will give them an opportunity to avoid fees when these services do not meet their needs."
CUNA and NAFCU both said they hoped that the regulations would cause Congress to stop its efforts to pass legislation on the subject.
"NAFCU is urging Congress to cease their pursuit of overdraft protection legislation given the Fed's final rule and its findings regarding consumer preferences regarding overdraft," NAFCU President/CEO Fred Becker said in a statement.
CUNA President/CEO Dan Mica also expressed disappointment that the Fed didn't pay enough attention to the added regulatory burden that credit unions will face.
He said in a statement that the Fed "has placed a burden on credit unions by insisting that 'opt-in' be extended to existing members…It is disappointing more consideration was not given to the compliance costs associated with this mandate."
The Fed's summary of the rules can be read at: //www.federalreserve.gov/newsevents/press/bcreg/bcreg20091112a2.pdf
The text of the rule itself is at:
http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20091112a1.pdf
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