WASHINGTON — The Federal Reserve adopted new rules that will require credit unions and banks to obtain permission from customers-opt-in-for overdraft protection programs debit card and ATM transactions.
Under the new rules consumers must be given a notice that explains the policies, including fees. Without express permission from the consumer, the issuer cannot charge for overdrafts at retail stores or ATMs. The opt-in, however, will not apply to checking because studies showed that bank customers are more likely to accept such fees since checks are more typically used for more essential purchases. Nor will they cover overdrafts from recurring debit card transactions, such as to pay for utility or telephone bills that are set up in advance.
Adoption of the rules comes as Congress is debating legislation that would require opt-in for all overdraft programs and set limits on the number and amount of fees that could be charged.
The CU lobby is opposed to opt-in for overdraft programs, which have become one of their most profitable source of revenues. Recent studies indicate banks and credit unions earned as much as $38 billion from overdraft protection fees last year, at least $3 billion of that earned by credit unions.
"The final overdraft rules represent an important step forward in consumer protection," the Federal Reserve chairman, Ben Bernanke said. "Both new and existing account holders will be able to make informed decisions about whether to sign up for an overdraft service."
The new rules will take effect for new cards on July 1.
