Question PM26 asks Applicants to describe certain features related to the fees associated with any of an Applicant’s overdraft programs. If an Applicant charges overdraft fees that can exceed the amount of the item being cleared (see PM26.2a), or if an account holder of the Applicant may be charged overdraft fees on more than six occasions in a rolling 12-month period (see PM26.4a), Applicants are asked to explain how such practices should be considered consistent with an acceptable community development mission.
As part of any response, an Applicant should describe how it mitigates the risks to account holders associated with automated overdraft payment programs and any meaningful and effective action it takes to limit the use of overdraft by customers as a form of short-term, high-cost credit. Examples of such actions can be found in the FDIC’s 2010 guidance on “Overdraft Payment Programs and Consumer Protection” (FIL-81-2010), and include, but are not limited to:
- Monitoring programs for excessive or chronic customer use and contacting such customers (e.g., in person or via telephone) to discuss less costly alternatives to the automated overdraft payment program such as a linked savings account, a more reasonably priced line of credit consistent with safe and sound banking practices, or a safe and affordable small-dollar loan, and giving the customer a reasonable opportunity to decide whether to continue fee-based overdraft coverage or choose another available alternative.
- Offering consumers who have excessive or chronic use of overdraft fees access to free or low-cost financial education workshops or individualized financial counseling..
- Promptly honoring customers’ requests to decline coverage of overdrafts (i.e., opt-out) resulting from non-electronic transactions.
- Giving consumers the opportunity to affirmatively choose the overdraft payment product that overall best meets their needs.
- Instituting appropriate daily limits on overdraft fees (see PM26.3) and not charging overdraft fees for transactions that overdraw an account by a de minimis amount (see PM26.2); and
- Processing transactions in a manner designed to minimize the cost to consumers.
- Additional consumer protection features such as those listed in PM26.5