WASHINGTON – The Federal Reserve continued its efforts at consumer protection last week with a proposal on overdraft protection fees, that would require credit unions and other lenders to obtain the approval of all consumers before applying the so-called bounce protection to their ATM and debit accounts.
The proposed amendments to the Fed’s Reg E, Electronic Funds Transfer, came the same day the Fed issued final rules on credit cards that will bar practices like double-cycle billing, universal default, and retroactive rate increases.
Since many of the credit card practices barred by the Fed are little used by credit unions, the overdraft proposal may be more far-reaching. It would require customers to expressly approve, or "opt-in," to bounce protection on ATM transactions.
It would also prohibit institutions from charging an overdraft fee when the account is overdrawn because of a hold placed on funds in the customer’s account that exceed the transaction amount.
