Fed Proposes to Bar Banks From Automatically Enrolling Customers in Overdraft Protection Plans

The Fed has proposed an amendment to Regulation E and the accompanying commentary that would bar banks from enrolling consumers in their overdraft protection plans without customer approval. The proposal is available here.  Comments are due by March 30.  Here's the Fed's summary of the proposal:

The proposal would limit the ability of a financial institution to assess an overdraft fee for paying automated teller machine (ATM) withdrawals and onetime debit card transactions that overdraw a consumer’s account, unless the consumer is given notice of the right to opt out of the payment of such overdrafts, and the consumer does not opt out. As an alternative approach, the proposal would limit the ability of a financial institution to assess an overdraft fee for paying ATM withdrawals and one-time debit card transactions that overdraw a consumer’s account, unless the consumer affirmatively consents, or opts in, to the institution’s payment of overdrafts for these transactions. In addition, the proposal would prohibit financial institutions from assessing an overdraft fee if the overdraft would not have occurred but for a debit hold placed on funds in the consumer’s account that exceeds the actual amount of the transaction.

And here's the Center for Responsible Lending's take:

Banks should simply not be allowed to enroll their customers—without their permission—in systems that approve overdrafts without warning, and that artificially increase the number of $35 fees the banks' can charge for a shortfall. It is fundamentally unfair.

As the FDIC confirmed through a survey of their banks, the practice is out of control. It is costing working people big chunks of their hard-earned income.

You can find more from the Center for Responsible Lending here.  Comments to the Fed can be emailed to

regs.comments@federalreserve.govand should include in the subject heading Docket No. R-1343.