Overdraft opt-in notices: What about checks?

Hi, Compliance Friends! It’s already March, so we are busy preparing for our semi-annual Regulatory Compliance School. Every year NCUA publishes its annual supervisory priorities. Amongst this year’s priorities, the NCUA has identified Overdraft Services as an area of interest. This blog presents an analysis for when opt-in notices are required, especially for checks that have been returned for insufficient funds.

One-time Debit Card and ATMs

Pursuant to section 1005.17(b)(1), Regulation E’s opt-in requirement only applies to  ATM and one-time debit card transactions. From a plain-reading of the regulatory text, there is no regulatory requirement for an opt-out with regard to overdrafts for paper checks. However, interagency guidance has indicated that offering an election or opt-out of services is a best practice, both from a safety and soundness perspective and to avoid potential UDAAP issues with regard to overdrafts.

To begin this analysis, we are going to want to look at section 1005.17(b)(1):

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