Join us on Wednesday, March 10, 2010 from 2:00 – 3:00 p.m. EST
for our HOT TOPICS IN DEPOSIT COMPLIANCE webinar!
Hear our compliance experts speak on Regulations CC, E, and GG in this educational session on Deposit Compliance!
Presented by: Lorraine Williams & Roger Rumbaugh
The Compliance Research & Development Center is at the heart of what makes ICS Compliance unique. As Director, Lorraine Williams, CRCM, CRP, CAMS seamlessly manages the R&D Center and ensures that her colleagues are armed with the latest regulatory updates for their clients. With more than 35 years of progressive banking experience, Lorraine is an expert in all areas of regulatory compliance including the coordination of compliance training programs, monitoring/review programs, and policies & procedures updates.
More than half of Roger Rumbaugh’s 40 years of banking experience has been focused in legal and regulatory compliance. Roger currently serves as Director of The West Virginia School of Compliance and as Principal in the Compliance Forum Program of The Virginia Association of Community Banks, and is now Director of Compliance Services for ICS Compliance.
Presentation:
INSIGHTS_Hot Topics in Deposit Comp B.pdf (504.85 kb)
Deposit Compliance Live Recording.arf (27.44 mb)
To download the WebEx ARF player, click here.
Supplemental Materials:
Privacy - Model Notices.pdf (4.67 mb)
Reg E consent and revokation notices.pdf (33.35 kb)
Regulation E - Overdraft Rules 2010 07.pdf (169.69 kb)
Q & A:
Q: We do not have a formal overdraft service. How do these new Regs effect our bank?
A: Based on the proposed clarifications, the rule on charging fees for overdrafts on ATM and one-time debit card transactions applies to all institutions. Therefore, you would not be able to charge a fee for an overdraft on an ATM or one time debit card transaction that may end up positing to an account unless the customer has opted in to the charge. So basically, you just won’t be able to charge a fee for those occasional transactions that overdraw a customer’s account.
Q: How many of your clients are indicating they are going to emulate Bank of America's plan to just automatically reject POS transactions not tied to a savings account or credit card?
A: We don’t have any numbers. Most clients are still trying to determine how they want to handle this at this point in time.
Q: If a Bank offers an electronic format for opting in, must the process comply with E-Sign Act?
A: No, for this particular disclosure, the E-Sign Act does not apply. But the customer still needs to be able to agree to the electronic format. In other words, an institution can have a form or acceptance on its website but still offer a paper version for those that don’t have access to the website.
Q: For institutions with a policy not to authorize transactions against insufficient funds, but wants to continue to access a NSF when required to force-post an authorized transaction, how can we reserve this right? The model form does not appear to apply.
A: Based on the proposed clarifications, the rule on charging fees for overdrafts on ATM and one-time debit card transactions applies to all institutions. Therefore, you would not be able to charge a fee for an overdraft on an ATM or one-time debit card transaction that may end up positing to an account unless the customer has opted in to the charge. So basically, you just won’t be able to charge a fee for those occasional transactions that overdraw a customer’s account unless you can get them to opt in to the charge.
Q: We do not approve overdrafts for ATM & one-time debit card transactions today. They are excluded from our OD program. However, we obviously encounter OD problems when a transaction finally hits the account. Are we still barred from charging an OD fee?
A: Yes, You would not be able to charge a fee for an overdraft on an ATM or one-time debit card transaction that may end up positing to an account unless the customer has opted in to the charge.
Q: For the Overdraft notice, is it possible to opt-in everyone (i.e we do not allow a customer to make a purchase?) I just heard that Bank of America was going to deny transactions made via a debit card if there was not enough money in a customer's account.
A: You will not be able to opt-in everyone to the payment of overdrafts for ATM and one-time debit card transactions. Each customer will have to opt-in on each account. It appears that BofA’s decision was probably the simplest method of handling this new rule. Rather than go through the opt-in process, it was easier, yet will be more costly in the end, to just deny the transactions and not be able to charge for those that do get through.
Q: What happens when we raise NSF fees? New opt-in required?
A: When you raise NSF fees, Reg DD will apply. Therefore, you will need to send customers a notice 30 days in advance of the fee change.
Q: On Reg E - contents of the notice - if we change our fees do we need to send another opt-in notice to those that already opted-in because of the new fee that will be imposed.
A: No. when you raise NSF fees, Reg DD will apply. Therefore, you will need to send customers a notice 30 days in advance of the fee change. The opt-in notice under Reg E will still remain in effect.
Q: If an institution chooses to not charge overdraft fees on ATM/POS transactions (like Bank of America) and we do not have a formal overdraft protection program, do the requirements of Reg E still apply?
A: BofA is choosing not to permit overdrafts to post on ATM and one-time debit card transactions under their overdraft program. Based on the proposed clarifications, the rule on charging fees for overdrafts on ATM and one-time debit card transactions applies to all institutions whether it has an overdraft program or not. Therefore, an institution would not be able to charge a fee for an overdraft on an ATM or one-time debit card transaction that may end up positing to an account unless the customer has opted in to the charge. So basically, an institution won’t be able to charge a fee for those occasional transactions that get through and overdraw a customer’s account.
Q: May the bank choose to waive overdraft fees on ATM and one time debit card transactions on consumer accounts that overdraw the account rather than go thru the opt in process.
A: Yes, if you do not charge a fee when an ATM or one-time debit card transaction overdraws an account, you do not need to deal with opt-in notices.
Q: Can we still use our current Privacy Notices until the end of December 2010?
A: Yes, but not longer than the end of CY 2010, in order to take advantage of the safe harbor with regard to both the language and format of the disclosure.
Q: Regarding Reg CC change notice to existing customers - Did I hear the speaker say that it is not okay to just send a brief statement that there are no longer non-local checks and that the entire policy must be sent to existing customers?
A: No, the recommendation was to send, at minimum, a statement message that simply says “Effective March 1, 2010, if we decide to place a hold on a check you deposit, the funds will generally be available on the second day after the day of the deposit.” If the institution does elect to send the entire policy/disclosure, it must either highlight the changes or send a cover letter explaining the changes.
Q: Regarding Reg E - if a financial institution chooses to INCREASE their NSF/OD fees, do they need to have the customer sign another "opt-in" form upon every increase?
A: No. when an institution raises NSF fees, Reg DD will apply. Therefore, it will need to send customers a notice 30 days in advance of the fee change. The opt-in notice under Reg E will still remain in effect.
Q: Regarding Reg E - does the fee limitation apply to the initial NSF fee, whether the item is paid or returned, or just to the overdraft fee after the account is overdrawn?
A: When an ATM or one-time debit card transaction is declined, a customer is typically not charged an NSF fee by the institution. In those situations where the transaction is approved but when it posts to the account there are insufficient funds, an institution may not charge a fee for the overdraft.
Q: When will the online privacy form builder be available on the regulators’ websites?
A: The forms are available now, but it is not known if the versions on those web sites may be filled or otherwise modified. The forms are pdf files.
Q: Regarding the new Reg E - we realize you cannot incent a customer to opt-in; but can you offer an incentive for customers to reply to a mailing (with either a yes or no). In other words, incent them for replying.
A: There is nothing in the new Reg E that addresses your question. You should be very cautious on what you might use as an incentive to reply. You would not want to use account terms or conditions as an incentive.
Q: Will exception hold reasons be scrutinized more now by regulators?
A: Whether exception holds are scrutinized more closely by regulators is difficult to predict, but nothing involved with the consolidation of check processing and elimination of nonlocal checks should trigger additional scrutiny by regulators.
Q: If a NSF check is returned late, what can my institution do to request payment from that bank that replied late?
A: The depositary institution can claim delay in return, and may ultimately have to file suit against the returning bank to recover any losses. There is no specific process for this activity reflected within Regulation CC. Also, the return provisions of Regulation J are involved, and those provisions have not been amended for several years.
Q: Bank of America yesterday announced that beginning this summer it will decline debit card purchases at the point of sale when customers do not have enough money in their accounts to cover the transaction -- going a step further than required under new rule.
A: It appears that BofA’s decision was probably the simplest method of handling this new rule. Rather than go through the opt-in process, it was easier, yet will be more costly in the end, to just deny the transactions.
Q: Our policy is to decline the authorization when the funds are not available. What about when the transaction is posted and the funds are no longer available. Do we have to have an opt in?
A: No, as long as you do not charge a fee when an ATM or one-time debit card transaction overdraws an account.
Q: If a Bank, has a no overdraft policy, what do we need to do with regards to the Reg E changes, if anything?
A: An institution will need to be sure that fees are not charged if an ATM or one-time debit card transaction does post to an account causing an overdraft. In most cases the transaction should be declined. But there could be instances where one gets through and posts to the account causing an overdraft.
Q: When or will ICS hold an event like this for Reg GG and FCRA changes?
A: These are topics being considered for future webinars. We will send out invitations as we did for this one.
Q: If a Bank elects to start this process prior to July 1, must they have the core system functionality to prevent fees from being charged even prior to July 1 or August 15?
A: Yes, if an institution elects to comply prior to July 1, 2010, all compliance requirements must be met at the time of implementation.
Q: Will all the info that Lorraine went over on Reg E that is not in the material handouts be made available at a later date?
A: Please see file entitled “Regulation E - Overdraft Rules” here in the ICS Compliance News Center.
Q. Can you have an opt-in at a customer level or is it required to be at an account level? If a customer has multiple DDA accounts, would one opt in suffice?
A. The opt-in is at account level. Each account will require an opt-in.
Q. Under the requirements how must sole proprietors be treated, Consumer or Business Accounts or do banks have an option?
A. Reg E applies to accounts for personal, family or household purposes. Therefore, a sole proprietor account would not be covered by Reg E to begin with. Therefore, the overdraft rules would not apply.
Q. If any bank never charges a fee for an ATM/Debit overdraft would they need to go through this opt-in process?
A. By definition an overdraft service is not applicable when no fee is charged for the overdraft. Therefore, no opt-in is required.
Q. Can I charge a fee for a one time debit card transaction that posts to an account and causes an overdraft situation even though we do not have an overdraft program?
A. No, in cases where an ATM or one time debit card transaction gets posted to an account and causes an overdraft to the account, an institution cannot charge a fee for the transaction being posted.
