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Friday, January 1, 2010

New Rules Prohibit Fees on ATM, Debit Overdrafts

Beginning next July, financial institutions can no longer charge consumers fees for paying overdrafts on automated teller machines (ATMs) and one-time debit card transactions, unless the consumer consents, or opts in, to an overdraft service for those types of transactions. The Federal Reserve Board recently announced the new rules on the fees.

The rules state financial institutions must notify consumers about available overdraft services, including any fees and the consumer’s choices, before the consumer opts in. The final rules, along with a model opt-in notice, are issued under Regulation E, which implements the Electronic Fund Transfer Act.

Consumer testing by the Board shows that most consumers do not want to be enrolled in overdraft services for ATM and one-time debit card transactions unless they consent, or opt in. However, testing also shows that most consumers want overdraft services to cover important bills, such as checks they use to pay rent and utilities.

The final rules also prohibit financial institutions from discriminating against consumers who do not opt in. Financial institutions must provide consumers who do not opt in with the same account terms, conditions and features (including pricing) that they provide to consumers who do opt in. For consumers who do not opt in, the institution would be prohibited from charging overdraft fees for any overdrafts it pays on ATM and one-time debit card transactions.