Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Rules and Regulations 31665 

would not be well received by the 

industry at this time, and that the less 

restrictive recommendation 

subsequently made should adequately 

solve the current marketing problem. 

This rule does not impose any 

additional reporting or recordkeeping 

requirements on either small or large 

sweet cherry handlers. As with all 

Federal marketing order programs, 

reports and forms are periodically 

reviewed to reduce information 

requirements and duplication by 

industry and public sector agencies. In 

addition, USDA has not identified any 

relevant Federal rules that duplicate, 

overlap or conflict with this rule. 

AMS is committed to complying with 

the E-Government Act, to promote the 

use of the Internet and other 

information technologies to provide 

increased opportunities for citizen 

access to government information and 

services, and for other purposes. 

In addition, the Committee meeting 

was widely publicized throughout the 

Washington cherry industry and all 

interested persons were invited to 

attend the meeting and participate in 

the deliberations. Like all Committee 

meetings, the May 14, 2009 meeting was 

a public meeting and all entities, both 

large and small, were able to express 

their views on this issue. 

A proposed rule concerning this 

action was published in the Federal 

Register on March, 8, 2010 (75 FR 

10442). Copies of the rule were made 

available to all Committee members and 

sweet cherry handlers. The proposed 

rule was also made available through 

the Internet by USDA and the Office of 

the Federal Register. A 60-day comment 

period ending May 7, 2010, was 

provided to allow interested persons to 

respond to the proposal. No comments 

were received. 

A small business guide on complying 

with fruit, vegetable, and specialty crop 

marketing agreements and orders may 

be viewed at: http://www.ams.usda.gov/ 

AMSv1.0/ams.fetchTemplateData.

do?template=Template

N&page=MarketingOrdersSmall

BusinessGuide. Any questions about the 

compliance guide should be sent to 

Antoinette Carter at the previously 

mentioned address in the FOR FURTHER

INFORMATION CONTACT section. 

After consideration of all relevant 

matter presented, including the 

information and recommendation 

submitted by the Committee and other 

available information, it is hereby found 

that this rule, as hereinafter set forth, 

will tend to effectuate the declared 

policy of the Act. 

It is further found that good cause 

exists for not postponing the effective 

date of this rule until 30 days after 

publication in the Federal Register (5 

U.S.C. 553) because the 2010 cherry 

harvest may start as early as the last 

week in May and handlers will want to 

take advantage of the potential 

economic benefits of this rule. Further, 

handlers are aware of this rule, which 

was recommended at a public meeting. 

Finally, a 60-day comment period was 

provided for in the proposed rule. 

List of Subjects in 7 CFR Part 923 

Cherries, Marketing agreements, 

Reporting and recordkeeping 

requirements. 

■ For the reasons set forth in the 

preamble, 7 CFR part 923 is amended as 

follows: 

PART 923—SWEET CHERRIES 

GROWN IN DESIGNATED COUNTIES 

IN WASHINGTON 

■ 1. The authority citation for 7 CFR 

part 923 continues to read as follows: 

Authority: 7 U.S.C. 601–674. 

■ 2. In § 923.322, redesignate paragraph 

(e) as paragraph (d), add a new 

paragraph (e), and revise the 

introductory sentence of paragraph (g) 

to read as follows: 

§ 923.322 Washington cherry handling 

regulation. 

* * * * * 

(e) Light sweet cherries marked as 

premium. No handler shall handle, 

except as otherwise provided in this 

section, any package or container of 

Rainier cherries or other varieties of 

lightly colored sweet cherries marked as 

premium except in accordance with the 

following: 

(1) Quality. 90 percent, by count, of 

such cherries in any lot must exhibit a 

pink-to-red surface blush and, for any 

given sample, not more than 20 percent 

of the cherries shall be absent a pink-tored surface blush. 

(2) Pack. At least 90 percent, by 

count, of the cherries in any lot shall 

measure not less than 64⁄64 inch (101⁄2

row) in diameter and not more than 5 

percent, by count, may be less than 61⁄64

inch (11-row) in diameter. 

* * * * * 

(g) Exceptions. Any individual 

shipment of cherries which meets each 

of the following requirements may be 

handled without regard to the 

provisions of paragraphs (a), (b), (c), (d), 

and (e) of this section, and of §§ 923.41 

and 923.55. 

* * * * * 

Dated: May 28, 2010. 

Rayne Pegg, 

Administrator, Agricultural Marketing 

Service. 

[FR Doc. 2010–13408 Filed 6–3–10; 8:45 am] 

BILLING CODE 3410–02–P 

FEDERAL RESERVE SYSTEM 

12 CFR Part 205 

[Regulation E; Docket No. R–1343] 

Electronic Fund Transfers 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Final rule. 

SUMMARY: On November 17, 2009, the 

Board published a final rule amending 

Regulation E, which implements the 

Electronic Fund Transfer Act, and the 

official staff commentary to the 

regulation (Regulation E final rule). The 

Regulation E final rule limited the 

ability of financial institutions to assess 

overdraft fees for paying automated 

teller machine (ATM) 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 those transactions. The 

Board is amending Regulation E and the 

official staff commentary to clarify 

certain aspects of the Regulation E final 

rule. 

DATES: This rule is effective July 6, 

2010. 

FOR FURTHER INFORMATION CONTACT: 

Dana E. Miller or Vivian W. Wong, 

Senior Attorneys, or Ky Tran-Trong, 

Counsel, Division of Consumer and 

Community Affairs, at (202) 452–3667 

or (202) 452–2412, Board of Governors 

of the Federal Reserve System, 20th and 

C Streets, NW., Washington, DC 20551. 

For users of Telecommunications 

Device for the Deaf (TDD) only, contact 

(202) 263–4869. 

SUPPLEMENTARY INFORMATION: 

I. Background 

In November 2009, the Board adopted 

a final rule under Regulation E, which 

implements the Electronic Fund 

Transfer Act (EFTA), limiting a financial 

institution’s ability to assess fees for 

paying ATM and one-time debit card 

transactions pursuant to the institution’s 

overdraft service without the 

consumer’s affirmative consent. The 

rule was published in the Federal 

Register in November 2009 and has a 

mandatory compliance date of July 1, 

2010. See 74 FR 59033 (November 17, 

2009) (Regulation E final rule). 


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31666 Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Rules and Regulations 

Since publication of the Regulation E 

final rule, institutions have requested 

clarification of particular aspects of the 

rule and further guidance regarding 

compliance with the rule. In addition, 

certain technical corrections are 

necessary. Accordingly, the Board 

proposed to amend Regulation E and the 

official staff commentary. See 75 FR 

9120 (March 1, 2010). 

The Board received approximately 90 

comments on the proposal, including 

from financial institutions and their 

trade associations, as well as consumer 

groups. As described in Part III of this 

SUPPLEMENTARY INFORMATION, the final 

rule adopts the proposal largely as 

proposed, with additional commentary. 

Separately, the Board is also amending 

Regulation DD elsewhere in today’s 

Federal Register to make certain 

clarifications and conforming 

amendments in light of provisions 

adopted in the Regulation E final rule. 

II. Statutory Authority 

The EFTA, 15 U.S.C. 1693 et seq., is 

implemented by the Board’s Regulation 

E (12 CFR part 205). The purpose of the 

act and regulation is to provide a 

framework establishing the rights, 

liabilities, and responsibilities of 

participants in electronic fund transfer 

systems. An official staff commentary 

interprets the requirements of 

Regulation E (12 CFR part 205 (Supp. 

I)). In the SUPPLEMENTARY INFORMATION

to the Regulation E final rule, the Board 

described its statutory authority and 

applied that authority to the 

requirements of the rule. For purposes 

of this rulemaking, the Board continues 

to rely on the description of its legal 

authority and analysis in the Regulation 

E final rule. 

III. Section-by-Section Analysis 

A. Section 205.17(a)—Definition 

Section 205.17(a) of the Regulation E 

final rule defines the term ‘‘overdraft 

service’’ for purposes of § 205.17. In 

particular, § 205.17(a)(3) of the final rule 

explains that the term does not include 

payments of overdrafts pursuant to, 

among other things, credit exempt from 

Regulation Z pursuant to 12 CFR 

226.3(d), which is credit secured by 

margin securities in brokerage accounts 

extended by Securities and Exchange 

Commission or Commodity Futures 

Trading Commission-registered brokerdealers. Comment 17(a)–1 provided 

further guidance on this exception. 

However, comment 17(a)–1 

inadvertently stated that ‘‘§ 205.17(a)(3) 

does not apply’’ to margin credit 

transactions. As adopted, this would 

mean that the exception to the 

definition of ‘‘overdraft service’’ in 

§ 205.17(a)(3) does not apply to margin 

credit. The Board proposed to revise 

comment 17(a)–1 to eliminate the 

incorrect reference. The Board did not 

receive comment on this provision, 

which is adopted as proposed. 

B. Section 205.17(b)—Opt-In 

Requirement 

17(b)(1), 17(b)(4)—General Rule and 

Scope of Opt-In; Notice and Opt-In 

Requirements 

Section 205.17(b)(1) of the Regulation 

E final rule prohibits an accountholding financial institution from 

assessing a fee or charge on a 

consumer’s account for paying an ATM 

or one-time debit card transaction that 

overdraws the account, unless the 

institution satisfies several 

requirements, including providing 

consumers notice and obtaining the 

consumer’s affirmative consent to the 

overdraft service. Section 205.17(b)(4) 

provides an exception from the notice 

and opt-in requirements of 

§ 205.17(b)(1) for institutions that have 

a policy and practice of declining ATM 

and one-time debit card transactions for 

which authorization is requested, when 

the institution has a reasonable belief 

that the consumer’s account has 

insufficient funds at the time of the 

authorization request. 

Since the issuance of the Regulation 

E final rule, questions have been raised 

as to whether the § 205.17(b)(4) 

exception would permit institutions 

with such a policy and practice to assess 

an overdraft fee without the consumer’s 

affirmative consent if a transaction, 

authorized on the belief that there are 

sufficient funds, settles on insufficient 

funds. To clarify the intended scope of 

this provision, the Board proposed to 

amend §§ 205.17(b)(1), (b)(4), and the 

related commentary to explain that the 

fee prohibition in § 205.17(b)(1) applies 

to all institutions, and that 

§ 205.17(b)(4) provides relief only from 

the requirements of §§ 205.17(b)(1)(i)– 

(iv), including the notice and opt-in 

requirements. The proposal thus 

clarified the Board’s intent that 

institutions cannot assess a fee for the 

payment of ATM and one-time debit 

card overdrafts if the consumer does not 

opt in, even if the institution has a 

policy and practice of declining ATM 

and one-time debit card transactions 

upon a reasonable belief that an account 

has insufficient funds. 

Many industry commenters argued 

that the Board should interpret 

§ 205.17(b)(4) to exempt institutions 

with a policy and practice of declining 

ATM and one-time debit card 

transactions upon a reasonable belief 

that an account has insufficient funds 

from the fee prohibition, as well as from 

the notice and opt-in requirements of 

the rule. These commenters argued that 

for those institutions without formal 

overdraft programs, overdrafts will 

occur only in circumstances outside the 

institution’s control, and that consumers 

should retain the responsibility to 

balance their checking accounts. For 

example, an institution may authorize a 

one-time debit card transaction on the 

reasonable belief that there are sufficient 

funds in the account, but intervening 

transactions, such as checks, may 

reduce the available funds in the 

checking account before the transaction 

is presented for settlement, causing an 

overdraft. Thus, these commenters 

stated that § 205.17(b)(4) should be 

revised to permit such institutions to 

charge overdraft fees without the 

consumer’s affirmative consent. Other 

industry commenters disagreed with the 

Board’s position, but supported the 

Board’s effort to clarify the scope of the 

provision. For further clarity, these 

commenters suggested revisions to the 

language of § 205.17(b)(4), or removal of 

that provision as superfluous. Consumer 

group commenters strongly supported 

the proposed clarification for the 

reasons expressed by the Board in its 

proposal. 

The final rule does not provide any 

exceptions for allowing overdraft fees 

for ATM and one-time debit card 

transactions to be imposed without 

consumer consent. For clarity, however, 

the Board is deleting § 205.17(b)(4) and 

instead incorporating its content into a 

revised comment to § 205.17(b)(1). For 

the reasons explained in the 

SUPPLEMENTARY INFORMATION to the 

Regulation E final rule, as well as the 

March 2010 proposed rule, the Board 

believes that adopting exceptions to the 

fee prohibition would undermine the 

consumer’s ability to understand the 

institution’s overdraft practices and to 

make an informed choice. 74 FR 59045; 

75 FR 9121. Moreover, permitting fees 

on transactions that are authorized on 

sufficient funds but settle on 

insufficient funds would create a 

disincentive to resolve inefficiencies in 

payment systems and in processing 

procedures, which would not benefit 

consumers. 

The final rule clarifies that the 

prohibition on assessing overdraft fees 

under § 205.17(b)(1) applies to all 

institutions, including those institutions 

that have a policy and practice of 

declining to authorize and pay any ATM 

or one-time debit card transactions 

when they have a reasonable belief at 

the time of the authorization request 


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Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Rules and Regulations 31667 

1The Board is also adopting conforming revisions 

to § 205.17(b)(1). 

that the consumer does not have 

sufficient funds available to cover the 

transaction.1 Section 205.17(b)(4) of the 

Regulation E final rule and the proposed 

amendments to that section in the 

March 2010 proposal were designed to 

clarify the obligations of institutions 

with such a policy and practice. 

However, because § 205.17(b)(1) 

contains a general prohibition on 

charging overdraft fees unless certain 

requirements are fulfilled, the Board 

concludes that it is unnecessary to 

include a separate section with respect 

to those institutions. Accordingly, the 

final rule deletes § 205.17(b)(4) and 

instead addresses this issue by adding a 

comment to § 205.17(b)(1). The 

placement of this provision in new 

comment 17(b)(1)–1.iv does not, 

however, alter the substance of the rule. 

The Regulation E final rule (and in a 

slightly revised iteration, the March 

2010 proposed rule) also included 

language in § 205.17(b)(4), and related 

comment 17(b)(4)–1, explaining the 

application of § 205.17(b)(4) to accounts 

on an account type-by-account type 

basis. These provisions were designed 

to provide guidance where institutions 

may follow different practices for 

different types of accounts. A few 

commenters suggested that the Board 

revise or delete these provisions as 

unnecessary because, if a financial 

institution does not charge overdraft 

fees on a given account for ATM or onetime debit card transactions, there 

should be no obligation to comply with 

the requirements of § 205.17(b)(1)(i)– 

(iv). The Board agrees, and for 

simplicity has deleted the language and 

accompanying comment. 

17(b)(1)(iv)—Confirmation 

Section 205.17(b)(1)(iv) states that an 

institution must provide the consumer a 

confirmation of his or her opt-in choice 

in writing, or electronically if the 

consumer agrees, before charging 

overdraft fees. The confirmation helps 

ensure that a consumer intended to opt 

into an institution’s overdraft service, 

particularly where a consumer has 

opted in by telephone, by providing the 

consumer with a record of that choice. 

Some institutions have asked whether 

the confirmation required by 

§ 205.17(b)(1)(iv) must be provided to 

the consumer before the institution may 

assess overdraft fees. 

The Board proposed to revise 

comment 17(b)–7 to clarify that an 

institution may not assess any overdraft 

fees or charges on the consumer’s 

account until the institution has sent the 

written confirmation. To address 

concerns about operational and 

litigation risks related to tracking 

compliance with the confirmation 

requirement, the proposed comment 

also stated that an institution complies 

with § 205.17(b)(1)(iv) if it has adopted 

reasonable procedures designed to 

ensure that the written confirmation is 

sent before fees are assessed. 

Consumer group commenters argued 

that fees should not be charged until 

five business days after the institution 

sends the customer the written 

confirmation. This time frame, they 

argued, would provide sufficient time 

for a consumer to receive the 

confirmation and to affirm his or her 

choice. Industry commenters argued 

that institutions should be permitted to 

charge fees as soon as the consumer has 

provided consent and before the written 

confirmation is provided to the 

consumer. These commenters also 

stated that the rule should permit the 

written confirmation to be provided 

promptly or by the end of the business 

day following the consumer’s opt-in. 

The Board is adopting the comment 

substantially as proposed, with 

revisions designed to prevent evasion of 

the confirmation requirement. 

The rule does not require receipt of 

the confirmation by the consumer before 

an institution may impose a fee because 

a consumer may not opt into an 

institution’s overdraft service until the 

time the service is needed. Requiring 

receipt of the confirmation would delay 

the consumer’s access to overdraft 

funds. By contrast, permitting fees to be 

charged once the confirmation is 

provided allows institutions to pay the 

transaction with minimal delay to the 

consumer, in accordance with the 

consumer’s direction. At the same time, 

if fees cannot be charged until the 

confirmation has been provided, 

institutions would be incented to mail 

or deliver the written confirmation 

promptly. This would alert consumers 

to their choice quickly and enable them 

to revoke their choice if they did not 

intend to opt in. The requirement to 

provide the confirmation before 

charging overdraft fees thus balances the 

objective of ensuring that consumers 

understand their choice with the 

objective of providing consumers access 

to overdraft services expeditiously when 

requested. 

Some industry commenters argued 

that consumers may have an emergency 

during non-bank hours, and need 

immediate access to funds. Such 

instances would presumably be rare. 

Moreover, the rule does not prohibit 

institutions from paying the overdraft, 

so long as an overdraft fee is not 

charged. 

Several commenters asked the Board 

to clarify what is meant by ‘‘sent’’ when 

a confirmation notice is provided in 

person (for instance, at a branch). In 

response, the final comment has been 

revised to indicate that the confirmation 

notice must be ‘‘mailed or delivered’’ 

(for example, by handing the consumer 

the confirmation in a branch). In 

addition, a few commenters suggested 

that the Board revise the comment, 

which references a written 

confirmation, to recognize that the 

confirmation may also be provided 

electronically if the consumer agrees, 

consistent with § 205.17(b)(1)(iv). The 

final comment has been revised by 

eliminating the references to ‘‘written 

confirmation’’ and replacing them with 

the more generic term ‘‘confirmation.’’ 

The Board has also received questions 

as to whether the confirmation, as well 

as the opt-in notice required by 

§ 205.17(b)(1)(i), may be provided 

orally. As specified in the Regulation E 

final rule, these disclosures must be 

provided in writing, or electronically if 

the consumer agrees, before the 

institution assesses any overdraft fees 

for ATM and one-time debit card 

transactions that overdraw the 

consumer’s account. Further, § 205.4(a) 

of Regulation E generally requires 

disclosures to be clear and readily 

understandable, and in a form the 

consumer may keep. Oral disclosures 

would not comply with the 

requirements of §§ 205.17(b)(1)(i) or 

(b)(1)(iv). 

Upon further analysis, the Board is 

concerned about possible circumvention 

of the fee prohibition. The proposed 

comment stated that the institution may 

not assess overdraft fees until the 

confirmation is sent, but it did not 

expressly tie the mailing or delivery of 

the confirmation to the payment of the 

transaction. Therefore, the proposal 

might arguably be read to permit 

institutions to pay a transaction into 

overdraft before the confirmation is sent 

and simply wait to assess a fee on an 

account until after the confirmation is 

sent. As discussed below, final 

comment 17(b)–7 has been revised to 

clarify that fees or charges may 

generally be assessed only on 

transactions paid after the confirmation 

has been mailed or delivered. An 

interpretation tying the confirmation 

with the payment of transactions is 

consistent with comment 17(c)–2, 

adopted in the Regulation E final rule, 

which clarified that institutions may 

only assess overdraft fees on 


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31668 Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Rules and Regulations 

2For ease of reference, a cross-reference to 

comment 17(b)–7 has been added to comment 

17(c)–2. 

3Because § 205.17(b)(3) prohibits variations in 

account terms, any increases in overdraft fees 

resulting from the elimination of a tiered-fee 

structure would also apply to consumers who have 

opted in. 

transactions paid after obtaining the 

consumer’s affirmative consent.2

The Board recognizes the operational 

and litigation risks related to 

compliance with the confirmation 

requirement. Final comment 17(b)–7 

therefore provides that an institution 

complies with the confirmation 

requirement if it has adopted reasonable 

procedures designed to ensure that 

overdraft fees are assessed only in 

connection with transactions paid after 

the confirmation has been mailed or 

delivered to the consumer. Thus, an 

institution that adopts and follows such 

procedures complies with the rule even 

if on rare occasion, notwithstanding 

such procedures, it assesses a fee before 

the confirmation is mailed or delivered. 

For example, an institution complies 

with the rule if a computer error results 

in the confirmation being mailed after 

an overdraft fee is assessed. 

Comment 17(b)–8—Outstanding 

Negative Balance 

While many institutions charge the 

same per-item overdraft fee regardless of 

the amount of the consumer’s negative 

balance, some institutions impose tiered 

fees based on the amount of the 

consumer’s outstanding negative 

balance at the end of the day. For 

example, an institution may impose a 

$10 per-item overdraft fee if the 

consumer’s account is overdrawn by 

less than $20, and a $25 per-item 

overdraft fee if the account is overdrawn 

by $20 or more. Questions have been 

raised as to how overdraft fees may be 

assessed in these circumstances if a 

consumer has not opted into the 

payment of ATM and one-time debit 

card transactions, but if overdrafts may 

be paid and fees assessed for other types 

of transactions, such as checks and 

ACH. 

Proposed comment 17(b)–8 addressed 

how institutions may impose tiered fees 

based on the amount of the consumer’s 

outstanding negative balance if a 

consumer has not opted into the 

payment of ATM or one-time debit card 

overdrafts. In such circumstances, the 

proposal stated that the fee or charge 

must be based on the amount of the 

negative balance attributable solely to 

check, ACH, or other types of 

transactions not subject to the fee 

prohibition. An industry commenter 

observed that the proposed treatment of 

tiered fees under the comment was 

inconsistent with the treatment of flat 

per-item overdraft fees (that is, fees that 

do not vary from transaction to 

transaction) under the rule. For 

example, if a consumer who has not 

opted in has a beginning balance of $10, 

and the institution pays a $30 point-ofsale transaction and a $20 check, 

resulting in a negative balance of $40, 

an institution would be permitted to 

charge a flat per-item fee on the check 

transaction without regard to the pointof-sale transaction. Under proposed 

comment 17(b)–8, however, the 

institution would be required to 

disregard the $30 point-of-sale 

transaction in determining the 

applicable fee tier. 

The commenter also argued that the 

treatment of tiered fees under proposed 

comment 17(b)–8 differed from the 

treatment of daily or sustained, negative 

balance, or other similar fees or charges 

under proposed comment 17(b)–9. 

Thus, the commenter argued that 

proposed comment 17(b)–8 should be 

revised, consistent with the treatment of 

flat per-item overdraft fees and 

sustained overdraft fees under comment 

17(b)–9. By contrast, consumer group 

commenters argued that comment 

17(b)–9 should instead be modeled after 

proposed comment 17(b)–8, such that 

sustained overdraft fees could only be 

charged if the negative balance was 

attributable solely to a type of 

transaction not subject to the opt-in 

right. 

Upon further analysis, the Board 

believes that proposed comment 17(b)– 

8, if adopted, could result in 

unfavorable consequences for 

consumers. Section 205.17(b)(1) does 

not prohibit institutions from charging 

flat per-item overdraft fees on checks, 

ACH, and other types of transactions not 

subject to the fee prohibition when a 

negative balance is attributable in part 

to such transactions, and in part to ATM 

or one-time debit card transactions. 

However, if a consumer does not opt in 

and an institution charges tiered fees, 

proposed comment 17(b)–8 would 

require the institution to program its 

systems to disregard any ATM or debit 

card transaction that creates in part a 

negative balance for purposes of 

determining the appropriate fee tier. 

There are significant operational costs 

associated with disregarding amounts 

overdrawn by ATM and one-time debit 

card transactions under the proposed 

approach to tiered fees. Therefore, 

institutions may decide to charge a flat 

per-item fee rather than a tiered fee. 

Elimination of tiered-fee structures 

could result in higher overall costs to 

consumers.3 Under a tiered-fee 

approach that is based on the total 

amount overdrawn, consumers who 

overdraw their account by a small 

amount are typically assessed a reduced 

fee, or fees may be waived altogether. 

For example, in a tiered-fee structure, an 

$8 overdraft may result in a lower-tier 

$5 or $10 fee—or no fee at all—instead 

of a flat $25 or $30 per-item fee. In many 

cases, the lower-tier fee is more 

proportional to the amount overdrawn 

than the flat per-item fee, which may 

substantially exceed the amount 

overdrawn. In such cases, consumers 

benefit from the lower costs associated 

with lower-tier fees. 

Therefore, final comment 17(b)–8 has 

been revised for consistency with the 

treatment of flat per-item fees under the 

rule. Comment 17(b)–8 states that if a 

fee or charge is based on the amount of 

the outstanding negative balance, the 

rule prohibits the assessment of any 

such fee if the negative balance is solely 

attributable to an ATM or one-time debit 

card transaction, unless the consumer 

has opted into the institution’s overdraft 

service for ATM or one-time debit card 

transactions. However, the comment 

explains that the rule does not prohibit 

an institution from assessing such a fee 

if the negative balance is attributable in 

whole or in part to a check, ACH, or 

other type of transaction not subject to 

the fee prohibition in § 205.17(b)(1). 

Comment 17(b)–9—Daily or Sustained 

Overdraft, Negative Balance, or Similar 

Fees or Charges 

Some institutions assess daily or 

sustained overdraft, negative balance, or 

similar fees or charges when a consumer 

has overdrawn an account and has not 

repaid the amount overdrawn within a 

specified period of time. For example, if 

a consumer overdraws his or her 

account by $30, the institution may 

assess an overdraft fee of $20. If the 

consumer does not repay the resulting 

negative $50 balance by the fifth day, 

the institution may assess an additional 

$20 sustained overdraft fee. 

In certain circumstances, as discussed 

above, an ATM or one-time debit card 

transaction may overdraw a consumer’s 

account, even if the consumer has not 

opted into the payment of such 

overdrafts. The proposal addressed 

whether the prohibition in 

§ 205.17(b)(1) against assessing overdraft 

fees on ATM and one-time debit card 

transactions where the consumer has 

not opted in applies to fees for daily or 

sustained overdrafts or negative 

balances. 


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Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Rules and Regulations 31669 

A consumer who has not opted into 

the payment of ATM and one-time debit 

card overdrafts may sometimes 

overdraw his or her account as a 

consequence of the payment both of 

these transactions and of check, ACH, or 

other types of transactions not subject to 

the fee prohibition in § 205.17(b)(1). The 

proposal also addressed whether a daily 

or sustained overdraft, negative balance, 

or similar fee or charge may be assessed 

if an account is overdrawn based in part 

on an ATM or one-time debit card 

transaction and in part to a check, ACH, 

or other type of transaction not subject 

to the fee prohibition. 

Proposed comment 17(b)–9 explained 

that for consumers who do not opt into 

the payment of ATM and one-time debit 

card overdrafts, where a negative 

balance is attributable solely to an ATM 

or one-time debit card transaction, the 

rule prohibits the assessment of such 

sustained overdraft fees. However, 

where the consumer’s negative balance 

is attributable in part to a check, ACH, 

or other type of transaction not subject 

to the fee prohibition in § 205.17(b)(1), 

and in part to an ATM or one-time debit 

card transaction, the proposed comment 

explained that an institution is not 

prohibited from assessing a daily or 

sustained overdraft, negative balance, or 

similar fee or charge, even if the 

consumer has not opted in. The 

proposed comment included three 

examples illustrating how fees may be 

applied when a negative balance is 

attributable in part to a check, ACH, or 

other type of transaction not subject to 

the fee prohibition. These examples 

were based on certain assumptions, 

including assumptions regarding the 

posting order of debits from the account 

and the allocation of subsequent 

deposits to those debits. 

Consumer group commenters objected 

to the proposed comment, arguing that 

sustained overdraft and negative 

balance fees should be prohibited unless 

the negative balance is attributable 

solely to check, ACH or other 

transactions not subject to the fee 

prohibition. Industry commenters 

supported the proposed clarification as 

consistent with the final rule. However, 

these commenters objected to the 

proposed examples, arguing that 

because institutions generally do not 

have a posting order policy for deposits, 

the examples should not address 

deposit allocation. 

The final rule adopts the proposed 

clarification substantively as proposed. 

However, the rule also adds a new 

comment 17(b)–9.iii containing an 

alternative approach for compliance 

with the fee prohibition in § 205.17(b)(1) 

that does not require the institution to 

consider allocation of deposits to debits. 

This approach, discussed in more detail 

below, facilitates compliance for 

institutions that do not have deposit 

allocation policies, while potentially 

resulting in fewer fees for consumers. 

Under the Regulation E final rule, 

consumers who do not opt in may not 

be assessed overdraft fees for paying 

ATM or one-time debit card 

transactions, including daily or 

sustained overdraft, negative balance, or 

similar fees or charges. Consumers who 

do not opt in may reasonably expect not 

to incur per-item overdraft fees for ATM 

and one-time debit card transactions, 

even if such transactions overdraw their 

accounts. Similarly, such consumers 

would reasonably expect not to incur 

daily or sustained overdraft, negative 

balance, or similar fees or charges due 

to these transactions. Comment 17(b)– 

9.i explains that if a consumer has not 

opted into the institution’s overdraft 

service for ATM and one-time debit card 

transactions, the fee prohibition in 

§ 205.17(b)(1) applies to all overdraft 

fees or charges for paying those 

transactions, including but not limited 

to daily or sustained overdraft, negative 

balance, or similar fees or charges. Thus, 

where a consumer’s negative balance is 

attributable solely to an ATM or onetime debit card transaction, the rule 

prohibits the assessment of such 

sustained overdraft fees if the consumer 

has not opted in. For example, if a 

consumer who has not opted in has a 

$50 account balance, and the institution 

nonetheless pays a $60 debit card 

transaction (and no other transactions 

occur), the institution may not charge 

any overdraft fees, including a daily or 

sustained overdraft, negative balance, or 

similar fee or charge, for paying that 

debit card transaction. 

The Regulation E final rule applies 

solely to overdraft fees imposed in 

connection with ATM and one-time 

debit card transactions. It does not 

apply to overdraft fees imposed in 

connection with other types of 

transactions, including check, ACH, and 

recurring debit card transactions. As a 

result, the rule does not prohibit 

institutions from imposing daily or 

sustained overdraft, negative balance, or 

similar fees or charges associated with 

paying overdrafts for transactions not 

covered by the final rule. For example, 

where a consumer has a $50 account 

balance, and the institution pays a $60 

check, the rule does not prohibit the 

institution from charging a per-item 

overdraft fee, as well as a daily or 

sustained, negative balance, or similar 

fee or charge if a negative balance 

remains outstanding. 

Comment 17(b)–9.i clarifies that 

where the consumer’s negative balance 

is attributable in part to a check, ACH, 

or other type of transaction not subject 

to the fee prohibition in § 205.17(b)(1), 

and in part to an ATM or one-time debit 

card transaction, an institution is not 

prohibited from assessing a daily or 

sustained overdraft, negative balance, or 

similar fee or charge, even if a consumer 

has not opted in. 

The Board believes this result is 

consistent with the general scope of the 

Regulation E final rule, which prohibits 

fees only with respect to ATM and onetime debit card transactions. For 

example, if a consumer has a $50 

account balance, and the institution 

posts a one-time debit card transaction 

of $60 and a check transaction of $40 

that same day, the institution may 

charge a per-item fee for the check 

overdraft (but cannot assess any 

overdraft fees for the debit card 

transaction if the consumer has not 

opted in). Using the same example, the 

Board believes the institution may also 

charge a sustained overdraft fee when 

permitted by the account agreement 

because the consumer’s negative 

balance is attributable in part to the $40 

check, assuming no other transactions 

occur or deposits are made to the 

account. 

The comment also provides guidance 

on the date on which such a fee may be 

assessed. Specifically, comment 17(b)– 

9.i states that the date is based on the 

date on which the check, ACH, or other 

type of transaction not subject to the fee 

prohibition is paid into overdraft. 

Because the rule does not cover checks, 

ACH, or recurring debit card 

transactions, the Board believes 

institutions may charge per-item 

overdraft fees, or sustained or other 

similar fees. Nonetheless, the Board 

believes it is appropriate to base the 

date on which fees may be charged on 

the date that the transaction not subject 

to the rule is paid. 

Proposed comment 17(b)–9.ii 

included three examples illustrating 

how fees may be applied when a 

negative balance is attributable in part 

to a check, ACH, or other type of 

transaction not subject to the fee 

prohibition in § 205.17(b)(1). The first 

example demonstrated the general 

application of the rule. The second 

example addressed the circumstance 

where a consumer with an outstanding 

negative balance makes a deposit that 

reduces the amount of the negative 

balance, but does not bring the account 

current. The third example 

demonstrated how to determine the date 

when fees may apply when the check, 

ACH, or other type of transaction is paid 


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on a different date than the ATM or onetime debit card transaction that 

overdraws the account. 

The proposed examples set out 

certain assumptions in order to provide 

clear guidance. Among the assumptions 

made were that the institution posts 

ATM and debit card transactions before 

it posts other transactions, and that it 

allocates deposits to debits in the same 

order in which it posts debits. Thus, the 

examples assumed that deposits made 

to the account are allocated first to debit 

card transactions, then to checks. 

However, the rule does not require 

transactions to be posted or deposits to 

be allocated in the manner set forth in 

the example. Institutions may post 

transactions or allocate deposits as 

permitted by applicable law. 

As noted above, industry commenters 

argued that the assumption relating to 

deposit allocation order, as well as the 

example in proposed comment 17(b)– 

9.ii(b) that takes the allocation of 

deposits into account, should be 

eliminated. These commenters argued 

that institutions generally do not have a 

posting order policy for deposits. 

Instead, commenters stated that the 

examples should permit sustained fees 

to be charged once the consumer has 

overdrawn the account (when permitted 

by the account agreement), until such 

time the account is brought current. 

The final rule prohibits overdraft fees 

with respect to ATM and one-time debit 

card transactions if the consumer has 

not opted in. Therefore, institutions 

must be able to determine whether a 

negative balance is attributable solely to 

these types of transactions, or to 

transactions on which overdraft fees are 

permitted. This inquiry is not a static 

one, however; when the amount of the 

negative balance is reduced by a deposit 

but not eliminated, institutions must be 

able to determine whether they can 

continue charging fees and still comply 

with the fee prohibition. Otherwise, if a 

small-dollar check overdraft occurs at 

the same time as a larger ATM or onetime debit card overdraft, a consumer 

would potentially be subject to 

sustained overdraft fees on the smalldollar check for an extended period of 

time, even where a deposit would have 

been sufficient to pay off the amount of 

the check. The examples demonstrate 

how an institution can make a 

determination about the permissibility 

of charging overdraft fees on an ongoing 

basis, and are adopted generally as 

proposed. 

The Board recognizes, however, that 

many institutions do not have specific 

deposit allocation policies or practices. 

Accordingly, the commentary to the 

final rule includes an alternative 

approach that institutions may use to 

comply with the fee prohibition in 

§ 205.17(b)(1) that does not require an 

institution to consider the allocation of 

deposits. Specifically, comment 17(b)– 

9.iii provides that, where a consumer 

has not opted into the payment of ATM 

or one-time debit card transaction 

overdrafts, an institution may comply 

with § 205.17(b)(1) by not assessing 

daily or sustained overdraft, negative 

balance, or similar fees or charges 

unless a consumer’s negative balance is 

attributable solely to checks, ACH or 

other types of transactions not subject to 

the fee prohibition, while that negative 

balance remains outstanding. Under this 

approach, the institution would not 

have to consider how to allocate 

subsequent deposits that reduce but do 

not eliminate the negative balance. For 

example, if a consumer has a negative 

balance of $30, of which $10 is 

attributable to a one-time debit card 

transaction, an institution complies 

with § 205.17(b)(1) if it does not assess 

a sustained overdraft fee while that 

negative balance remains outstanding. 

The Board believes such an approach 

will facilitate compliance for 

institutions. In addition, this approach 

may result in fewer fees for consumers, 

because institutions would not assess 

fees while that negative balance is 

outstanding even if they would 

otherwise be permitted to under the 

examples in comment 17(b)–9.ii. 

Some industry commenters requested 

additional time to implement the 

clarifications in proposed comment 

17(b)–9. The Board recognizes that 

programming systems to conform to the 

final rule may raise operational and cost 

concerns, and could be challenging to 

implement by July 1, 2010. However, 

the Board believes that by adopting the 

alternative approach set forth in 

comment 17(b)–9.iii, many institutions 

will be able to comply by July 1, 2010. 

As explained above, the final rule only 

permits daily or sustained, negative 

balance, or similar overdraft fees or 

charges where the negative balance is 

attributable in whole or in part to a type 

of transaction not subject to the fee 

prohibition. 

17(b)(3)—Same Account Terms, 

Conditions, and Features 

Comment 17(b)(3)–2 provides 

guidance on limited-feature deposit 

account products in light of the 

requirement under § 205.17(b)(3) to offer 

consumers the same account terms, 

conditions, and features regardless of 

their opt-in choice. This comment 

inadvertently included an incorrect 

cross-reference. The proposal revises the 

comment to omit the cross-reference. No 

comments were received on the 

revision, which is adopted as proposed. 

17(d)—Content and Format 

The Board did not propose revisions 

to § 205.17(d) and the related 

commentary regarding content and 

format of the opt-in notice. However, 

many industry commenters asked the 

Board to add commentary to clarify 

certain aspects of Model Form A–9, 

particularly because § 205.17(d) requires 

institutions to use an opt-in notice that 

is substantially similar to the model 

form and that contains any applicable 

content required by § 205.17(d). The 

Board is adding new comments 17(d)– 

3 through 17(d)–5 to address a number 

of these questions. In particular, several 

commenters had questions about 

modifications to the tear-off form on 

Model Form A–9. 

Section 205.17(d)(4) requires that the 

opt-in notice include the methods by 

which the consumer may consent to the 

overdraft service for ATM and one-time 

debit card transactions. New comment 

17(d)–3 explains that institutions may 

tailor Model Form A–9 to the methods 

offered by the institution. The comment 

explains that an institution need not 

provide the tear-off portion of Model 

Form A–9, for example, if it is only 

permitting consumers to opt in 

telephonically or electronically. 

In the SUPPLEMENTARY INFORMATION to 

the Regulation E final rule, the Board 

stated that institutions may, but are not 

required, to provide a signature line or 

check box where the consumer can 

indicate that they decline to opt in (as 

shown in the model form). Several 

industry commenters requested that the 

Board include this statement as a 

comment. For clarity, the statement has 

been included in comment 17(d)–3. 

New comment 17(d)–4 states an 

institution may use any reasonable 

method to identify the account for 

which the consumer submits the opt-in 

notice. For example, the institution may 

include a line for a printed name and an 

account number, as shown in Model 

Form A–9. Or, the institution may print 

a bar code or use other tracking 

information. (The comment crossreferences comment 17(b)–6, which 

describes how an institution obtains a 

consumer’s affirmative consent.) 

Section § 205.17(d)(5) requires 

institutions that offer a line of credit 

subject to the Board’s Regulation Z or a 

service that transfers funds from another 

account of the consumer held at the 

institution to cover overdrafts to state 

that fact in the opt-in notice. Because 

Model Form A–9 includes only a 

reference to a transfer from a savings 

account, two commenters suggested that 


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4See Interagency Guidance on Overdraft 

Protection Programs, 70 FR 9127, Feb. 24, 2005. 

the Board clarify the § 205.17(d)(5) 

requirement. Section 205.17(d) states 

that the notice required by 

§ 205.17(b)(1)(i) must ‘‘include all 

applicable items in this paragraph.’’ 

Thus, if an institution offers both a line 

of credit subject to the Board’s 

Regulation Z and a service that transfers 

funds from another account of the 

consumer held at the institution to 

cover overdrafts, the institution must 

state in its opt-in notice that both 

alternative plans are offered. If the 

institution offers one, but not the other, 

it must state in its opt-in notice the 

alternative plan that it offers. If the 

institution does not offer either plan, it 

should omit the reference to the 

alternative plans. For clarity, the Board 

is addressing the issue in a new 

comment 17(d)–5. 

Marketing of Opt-Ins 

Commenters also raised questions 

about how institutions may 

communicate with their customers 

about consumers’ opt-in choices. Some 

institutions have asked whether they 

may provide supplemental materials 

with the opt-in notices that describe 

their overdraft services. In footnote 39 to 

the Regulation E final rule, the Board 

explained that institutions may provide 

consumers other information about their 

overdraft services and other overdraft 

protection plans in a separate document 

outside of the opt-in notice. See 74 FR 

at 59047. However, to the extent such 

additional materials promote the 

payment of overdrafts under Regulation 

DD, they may be subject to additional 

disclosure requirements under 12 CFR 

230.11(b). The Board also notes that the 

opt-in notice may be combined with 

other materials (e.g., in the same 

mailing), but that the rule requires the 

notice to be segregated from all other 

information. See § 205.17(b)(1)(i). 

Industry commenters also asked 

whether opt-ins for multiple accounts 

may be obtained on one consent form 

(or in the course of obtaining opt-ins 

through any other method, such as over 

the phone or on-line). Any 

determination as to whether an opt-in 

has been obtained from a consumer in 

compliance with the rule depends on 

the facts and circumstances. However, 

whether or not a single form is used to 

obtain consumers’ opt-ins, a separate 

opt-in decision must be made for each 

account, and the choices must be 

presented in a clear and readily 

understandable manner. Thus, a 

statement on the form that the 

consumer’s signature acts as an opt-in 

for all of the consumer’s accounts is not 

permissible under the final rule. 

In addition, consumer group 

commenters expressed concern 

regarding certain marketing tactics that 

may be used by institutions to provide 

the required opt-in notices and to obtain 

consumers’ opt-ins. For example, one 

commenter raised concerns that 

institutions may be using Short Message 

Service (‘‘SMS’’) text messages as a 

means to provide the opt-in notice. 

Under the Regulation E final rule, the 

opt-in notice must be in a form 

substantially similar to Model Form A– 

9 and include all of the information 

specified in the rule. The notice must 

also be clear and readily 

understandable, and in a form the 

consumer may keep. The font size, 

screen size and character limitations 

inherent in SMS text messaging raise 

significant doubts about the ability of 

SMS text messages to satisfy the 

Regulation E disclosure requirements. 

The Board shares commenters’ 

concerns about the marketing of 

overdraft services, and is continuing to 

monitor how institutions are marketing 

opt-ins. The Board notes that under 

Regulation DD, advertisements may not 

be misleading or inaccurate. See 12 CFR 

230.8(a). Similarly, institutions must not 

market their overdraft services in a 

manner that constitutes an unfair or 

deceptive practice within the meaning 

of the Federal Trade Commission Act, 

15 U.S.C. 41 et seq. 

The Board also reminds institutions 

that the 2005 Joint Guidance on 

Overdraft Protection Programs,4

discussed in the Regulation E final rule, 

provides guidance on marketing and 

communication of overdraft services, as 

well as guidance regarding the 

disclosure and operation of program 

features. In addition to these best 

practices, the Joint Guidance addresses 

safety and soundness considerations 

and legal risks related to offering 

overdraft services to consumers. While 

certain aspects of the Joint Guidance 

have been superseded by subsequent 

regulatory changes, institutions should 

consider other aspects of the Joint 

Guidance that have not been addressed 

in regulations. 

IV. Regulatory Analysis 

Sections VII and VIII of the 

SUPPLEMENTARY INFORMATION to the 

Regulation E final rule set forth the 

Board’s analyses under the Regulatory 

Flexibility Act (5 U.S.C. 601 et seq.) and 

the Paperwork Reduction Act of 1995 

(44 U.S.C. 3506; 5 CFR part 1320 

Appendix A.1). See 74 FR 59050–59052. 

Because the final amendments are 

clarifications and do not alter the 

substance of the analyses and 

determinations accompanying the 

Regulation E final rule, the Board 

continues to rely on those analyses and 

determinations for purposes of this 

rulemaking. 

List of Subjects in 12 CFR Part 205 

Consumer protection, Electronic fund 

transfers, Federal Reserve System, 

Reporting and recordkeeping 

requirements. 

Authority and Issuance 

■ For the reasons set forth above, the 

Board amends 12 CFR part 205 and the 

Official Staff Commentary, as follows: 

PART 205—ELECTRONIC FUND 

TRANSFERS (REGULATION E) 

■ 1. The authority citation for part 205 

continues to read as follows: 

Authority: 15 U.S.C. 1693b. 

■ 2. Section 205.17 is amended by 

revising paragraph (b)(1) and removing 

paragraph (b)(4) to read as follows: 

§ 205.17 Requirements for overdraft 

services. 

* * * * * 

(b) Opt-in requirement. (1) General. 

Except as provided under paragraph (c) 

of this section, a financial institution 

holding a consumer’s account shall not 

assess a fee or charge on a consumer’s 

account for paying an ATM or one-time 

debit card transaction pursuant to the 

institution’s overdraft service, unless 

the institution: 

* * * * * 

■ 3. In Supplement I to part 205, 

■ a. In Section 205.17(a), paragraph 1. is 

revised. 

■ b. In Section 205.17(b), paragraph 7. is 

revised. 

■ c. In Section 205.17(b), new 

paragraphs 1.iv., 8. and 9. are added. 

■ d. In Section 205.17(b)(3), paragraph 

2. is revised. 

■ e. In Section 205.17(b)(4), paragraph 

1. is removed. 

■ f. In Section 205.17(c), paragraph 2. is 

revised. 

■ g. In Section 205.17(d), new 

paragraphs 3. through 5. are added. 

Supplement I to Part 205—Official Staff 

Interpretations 

* * * * * 

Section 205.17(a)—Requirements for 

Overdraft Services 

17(a) Definition 

1. Exempt securities- and commoditiesrelated lines of credit. The definition of 

‘‘overdraft service’’ does not include the 

payment of transactions in a securities or 


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commodities account pursuant to which 

credit is extended by a broker-dealer 

registered with the Securities and Exchange 

Commission or the Commodity Futures 

Trading Commission. 

17(b) Opt-in Requirement 

* * * * * 

1. Scope. 

* * * * * 

iv. Application of fee prohibition. The 

prohibition on assessing overdraft fees under 

§ 205.17(b)(1) applies to all institutions. For 

example, the prohibition applies to an 

institution that has a policy and practice of 

declining to authorize and pay any ATM or 

one-time debit card transactions when the 

institution has a reasonable belief at the time 

of the authorization request that the 

consumer does not have sufficient funds 

available to cover the transaction. However, 

the institution is not required to comply with 

§§ 205.17(b)(1)(i)–(iv), including the notice 

and opt-in requirements, if it does not assess 

overdraft fees for paying ATM or one-time 

debit card transactions that overdraw the 

consumer’s account. Assume an institution 

does not provide an opt-in notice, but 

authorizes an ATM or one-time debit card 

transaction on the reasonable belief that the 

consumer has sufficient funds in the account 

to cover the transaction. If, at settlement, the 

consumer has insufficient funds in the 

account (for example, due to intervening 

transactions that post to the consumer’s 

account), the institution is not permitted to 

assess an overdraft fee or charge for paying 

that transaction. 

* * * * * 

7. Confirmation. A financial institution 

may comply with the requirement in 

§ 205.17(b)(1)(iv) to provide confirmation of 

the consumer’s affirmative consent by 

mailing or delivering to the consumer a copy 

of the consumer’s completed opt-in notice, or 

by mailing or delivering a letter or notice to 

the consumer acknowledging that the 

consumer has elected to opt into the 

institution’s service. The confirmation, 

which must be provided in writing, or 

electronically if the consumer agrees, must 

include a statement informing the consumer 

of the right to revoke the opt-in at any time. 

See § 205.17(d)(6), which permits institutions 

to include the revocation statement on the 

initial opt-in notice. An institution complies 

with the confirmation requirement if it has 

adopted reasonable procedures designed to 

ensure that overdraft fees are assessed only 

in connection with transactions paid after the 

confirmation has been mailed or delivered to 

the consumer. 

8. Outstanding Negative Balance. If a fee or 

charge is based on the amount of the 

outstanding negative balance, an institution 

is prohibited from assessing any such fee if 

the negative balance is solely attributable to 

an ATM or one-time debit card transaction, 

unless the consumer has opted into the 

institution’s overdraft service for ATM or 

one-time debit card transactions. However, 

the rule does not prohibit an institution from 

assessing such a fee if the negative balance 

is attributable in whole or in part to a check, 

ACH, or other type of transaction not subject 

to the prohibition on assessing overdraft fees 

in § 205.17(b)(1). 

9. Daily or Sustained Overdraft, Negative 

Balance, or Similar Fee or Charge 

i. Daily or sustained overdraft, negative 

balance, or similar fees or charges. If a 

consumer has not opted into the institution’s 

overdraft service for ATM or one-time debit 

card transactions, the fee prohibition in 

§ 205.17(b)(1) applies to all overdraft fees or 

charges for paying those transactions, 

including but not limited to daily or 

sustained overdraft, negative balance, or 

similar fees or charges. Thus, where a 

consumer’s negative balance is solely 

attributable to an ATM or one-time debit card 

transaction, the rule prohibits the assessment 

of such fees unless the consumer has opted 

in. However, the rule does not prohibit an 

institution from assessing daily or sustained 

overdraft, negative balance, or similar fees or 

charges if a negative balance is attributable in 

whole or in part to a check, ACH, or other 

type of transaction not subject to the fee 

prohibition. When the negative balance is 

attributable in part to an ATM or one-time 

debit card transaction, and in part to a check, 

ACH, or other type of transaction not subject 

to the fee prohibition, the date on which such 

a fee may be assessed is based on the date 

on which the check, ACH, or other type of 

transaction is paid into overdraft. 

ii. Examples. The following examples 

illustrate how an institution complies with 

the fee prohibition. For each example, 

assume the following: (a) The consumer has 

not opted into the payment of ATM or onetime debit card overdrafts; (b) these 

transactions are paid into overdraft because 

the amount of the transaction at settlement 

exceeded the amount authorized or the 

amount was not submitted for authorization; 

(c) under the account agreement, the 

institution may charge a per-item fee of $20 

for each overdraft, and a one-time sustained 

overdraft fee of $20 on the fifth consecutive 

day the consumer’s account remains 

overdrawn; (d) the institution posts ATM and 

debit card transactions before other 

transactions; and (e) the institution allocates 

deposits to account debits in the same order 

in which it posts debits. 

a. Assume that a consumer has a $50 

account balance on March 1. That day, the 

institution posts a one-time debit card 

transaction of $60 and a check transaction of 

$40. The institution charges an overdraft fee 

of $20 for the check overdraft but cannot 

assess an overdraft fee for the debit card 

transaction. At the end of the day, the 

consumer has an account balance of negative 

$70. The consumer does not make any 

deposits to the account, and no other 

transactions occur between March 2 and 

March 6. Because the consumer’s negative 

balance is attributable in part to the $40 

check (and associated overdraft fee), the 

institution may charge a sustained overdraft 

fee on March 6 in connection with the check. 

b. Same facts as in a., except that on March 

3, the consumer deposits $40 in the account. 

The institution allocates the $40 to the debit 

card transaction first, consistent with its 

posting order policy. At the end of the day 

on March 3, the consumer has an account 

balance of negative $30, which is attributable 

to the check transaction (and associated 

overdraft fee). The consumer does not make 

any further deposits to the account, and no 

other transactions occur between March 4 

and March 6. Because the remaining negative 

balance is attributable to the March 1 check 

transaction, the institution may charge a 

sustained overdraft fee on March 6 in 

connection with the check. 

c. Assume that a consumer has a $50 

account balance on March 1. That day, the 

institution posts a one-time debit card 

transaction of $60. At the end of that day, the 

consumer has an account balance of negative 

$10. The institution may not assess an 

overdraft fee for the debit card transaction. 

On March 3, the institution pays a check 

transaction of $100 and charges an overdraft 

fee of $20. At the end of that day, the 

consumer has an account balance of negative 

$130. The consumer does not make any 

deposits to the account, and no other 

transactions occur between March 4 and 

March 8. Because the consumer’s negative 

balance is attributable in part to the check, 

the institution may assess a $20 sustained 

overdraft fee. However, because the check 

was paid on March 3, the institution must 

use March 3 as the start date for determining 

the date on which the sustained overdraft fee 

may be assessed. Thus, the institution may 

charge a $20 sustained overdraft fee on 

March 8. 

iii. Alternative approach. For a consumer 

who does not opt into the institution’s 

overdraft service for ATM and one-time debit 

card transactions, an institution may also 

comply with the fee prohibition in 

§ 205.17(b)(1) by not assessing daily or 

sustained overdraft, negative balance, or 

similar fees or charges unless a consumer’s 

negative balance is attributable solely to 

check, ACH or other types of transactions not 

subject to the fee prohibition while that 

negative balance remains outstanding. In 

such case, the institution would not have to 

determine how to allocate subsequent 

deposits that reduce but do not eliminate the 

negative balance. For example, if a consumer 

has a negative balance of $30, of which $10 

is attributable to a one-time debit card 

transaction, an institution complies with the 

fee prohibition if it does not assess a 

sustained overdraft fee while that negative 

balance remains outstanding. 

* * * * * 

Paragraph 17(b)(3)—Same Account Terms, 

Conditions, and Features 

* * * * * 

2. Limited-feature bank accounts. Section 

205.17(b)(3) does not prohibit institutions 

from offering deposit account products with 

limited features, provided that a consumer is 

not required to open such an account because 

the consumer did not opt in. For example, 

§ 205.17(b)(3) does not prohibit an institution 

from offering a checking account designed to 

comply with state basic banking laws, or 

designed for consumers who are not eligible 

for a checking account because of their credit 

or checking account history, which may 

include features limiting the payment of 

overdrafts. However, a consumer who 

applies, and is otherwise eligible, for a fullservice or other particular deposit account 


erowe on DSK5CLS3C1PROD with RULES
Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Rules and Regulations 31673 

1The Board published a technical amendment in 

April 2009 correcting a printing error with respect 

to Sample Form B–10. Depository institutions must 

use Sample Form B–10, or a substantially similar 

form, including the box and gridlines, to provide 

totals for overdraft fees and returned item fees for 

the statement cycle and year-to-date. 74 FR 17768 

(April 17, 2009). See § 230.11(a). 

product may not be provided instead with 

the account with more limited features 

because the consumer has declined to opt in. 

* * * * * 

Paragraph 17(c) Timing 

* * * * * 

2. Permitted fees or charges. Fees or 

charges for ATM and one-time debit card 

overdrafts may be assessed only for 

overdrafts paid on or after the date the 

financial institution receives the consumer’s 

affirmative consent to the institution’s 

overdraft service. See also comment 17(b)–7. 

Paragraph 17(d) Content and Format 

* * * * * 

3. Opt-in methods. The opt-in notice must 

include the methods by which the consumer 

may consent to the overdraft service for ATM 

and one-time debit card transactions. 

Institutions may tailor Model Form A–9 to 

the methods offered to consumers for 

affirmatively consenting to the service. For 

example, an institution need not provide the 

tear-off portion of Model Form A–9 if it is 

only permitting consumers to opt-in 

telephonically or electronically. Institutions 

may, but are not required, to provide a 

signature line or check box where the 

consumer can indicate that he or she declines 

to opt in. 

4. Identification of consumer’s account. An 

institution may use any reasonable method to 

identify the account for which the consumer 

submits the opt-in notice. For example, the 

institution may include a line for a printed 

name and an account number, as shown in 

Model Form A–9. Or, the institution may 

print a bar code or use other tracking 

information. See also comment 17(b)–6, 

which describes how an institution obtains a 

consumer’s affirmative consent. 

5. Alternative plans for covering overdrafts. 

If the institution offers both a line of credit 

subject to the Board’s Regulation Z (12 CFR 

part 226) and a service that transfers funds 

from another account of the consumer held 

at the institution to cover overdrafts, the 

institution must state in its opt-in notice that 

both alternative plans are offered. For 

example, the notice might state ‘‘We also offer 

overdraft protection plans, such as a link to 

a savings account or to an overdraft line of 

credit, which may be less expensive than our 

standard overdraft practices.’’ If the 

institution offers one, but not the other, it 

must state in its opt-in notice the alternative 

plan that it offers. If the institution does not 

offer either plan, it should omit the reference 

to the alternative plans. 

By order of the Board of Governors of the 

Federal Reserve System, May 27, 2010. 

Jennifer J. Johnson, 

Secretary of the Board. 

[FR Doc. 2010–13280 Filed 6–3–10; 8:45 am] 

BILLING CODE 6210–01–P 

FEDERAL RESERVE SYSTEM 

12 CFR Part 230 

[Regulation DD; Docket No. R–1315] 

Truth in Savings 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Final rule. 

SUMMARY: On January 29, 2009, the 

Board published final rules amending 

Regulation DD, which implements the 

Truth in Savings Act, and the official 

staff commentary to the regulation. The 

final rule addressed depository 

institutions’ disclosure practices related 

to overdraft services, including balances 

disclosed to consumers through 

automated systems. The Board is 

amending Regulation DD and the 

official staff commentary to address the 

application of the rule to retail sweep 

programs and the terminology for 

overdraft fee disclosures, and to make 

amendments that conform to the Board’s 

final Regulation E amendments 

addressing overdraft services, adopted 

in November 2009. 

DATES: The final rule is effective July 6, 

2010, except for § 230.11(a)(1)(i), which 

is effective October 1, 2010. 

FOR FURTHER INFORMATION CONTACT: 

Dana E. Miller or Vivian W. Wong, 

Senior Attorneys, or Ky Tran-Trong, 

Counsel, Division of Consumer and 

Community Affairs, at (202) 452–3667 

or (202) 452–2412, Board of Governors 

of the Federal Reserve System, 20th and 

C Streets, NW., Washington, DC 20551. 

For users of Telecommunications 

Device for the Deaf (TDD) only, contact 

(202) 263–4869. 

SUPPLEMENTARY INFORMATION: 

I. Background 

In December 2008, the Board adopted 

a final rule amending Regulation DD, 

which implements the Truth in Savings 

Act, and the official staff commentary to 

the regulation. The final rule addressed 

depository institutions’ disclosure 

practices related to overdraft services, 

including balances disclosed to 

consumers through automated systems. 

The rule was published in the Federal 

Register on January 29, 2009 and 

became effective January 1, 2010. See 74 

FR 5584 (Regulation DD final rule).1

In November 2009, the Board adopted 

a final rule under Regulation E, which 

implements the Electronic Fund 

Transfer Act, limiting a financial 

institution’s ability to assess fees for 

paying ATM and one-time debit card 

transactions pursuant to the institution’s 

discretionary overdraft service without 

the consumer’s affirmative consent to 

such payment. The rule was published 

in the Federal Register on November 17, 

2009 and has a mandatory compliance 

date of July 1, 2010. See 74 FR 59033 

(Regulation E final rule). 

Since publication of the two rules, 

institutions and others have requested 

clarification of particular aspects of the 

rule and further guidance regarding 

compliance with the rule. In addition, 

conforming amendments to the 

Regulation DD final rule are necessary 

in light of certain provisions 

subsequently adopted in the Regulation 

E final rule. Accordingly, the Board 

proposed to amend Regulation DD and 

the official staff commentary. 75 FR 

9126 (March 1, 2010). 

The Board received twelve comments 

on the proposed rule, including from 

financial institutions and their trade 

associations, as well as from a 

consortium of consumer groups. The 

final rule adopts the proposed rule 

substantially as proposed, with certain 

clarifications. Similarly, elsewhere in 

today’s Federal Register, the Board is 

amending certain aspects of the 

Regulation E final rule. 

II. Statutory Authority 

The Truth in Savings Act, 12 U.S.C. 

4301 et seq., is implemented by the 

Board’s Regulation DD (12 CFR part 

230). The purpose of the act and 

regulation is to assist consumers in 

comparing deposit accounts offered by 

depository institutions, principally 

through the disclosure of fees, the 

annual percentage yield, the interest 

rate, and other account terms. An 

official staff commentary interprets the 

requirements of Regulation DD (12 CFR 

part 230 (Supp. I)). Credit unions are 

governed by a substantially similar 

regulation issued by the National Credit 

Union Administration. In the 

SUPPLEMENTARY INFORMATION to the 

Regulation DD final rule, the Board 

described its statutory authority and 

applied that authority to the 

requirements of the rule. For purposes 

of this rulemaking, the Board continues 

to rely on that legal authority and 

analysis. 


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