Consumer Compliance Outlook: Second Quarter 2010

Compliance Alert

Final Reminder for Overdraft Protection and Credit Card Rules

Consumer compliance regulations are changing at a fast pace, and the effective dates for overdraft protection rules and the implementation of the third phase of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act) are rapidly approaching. Both new rules require procedural and system changes. Have you executed your implementation plans and tested your systems?

Overdraft Protection

The new overdraft rules prohibit financial institutions from charging consumers fees for paying overdrafts on automated teller machine (ATM) and one-time debit card transactions, unless a consumer consents or opts in to the overdraft service for those types of transactions. Before opting in, the consumer must be provided with a notice that explains the financial institution’s overdraft services, including the fees associated with the service and the consumer’s choices.

The final rules (along with a model opt-in notice) were issued under Regulation E, which implements the Electronic Fund Transfer Act, in November 2009. Final clarifications, addressing questions that have arisen since the final overdraft rules were published and providing further guidance regarding compliance with certain aspects of the rules, were released on May 28, 2010.

Financial institutions should carefully review the compliance requirements, since those continuing to offer overdraft protection services must obtain opt-in approval from new customers for all accounts opened after July 1 and for all existing customers by August 15.

Credit CARD Act

On June 15, 2010, the Board of Governors of the Federal Reserve System approved a final rule amending Regulation Z (Truth in Lending) to protect credit card users from unreasonable late payment and other penalty fees and to require credit card issuers to reconsider increases in interest rates imposed since January 1, 2009.

The final rule is the third stage of the Federal Reserve’s implementation of the Credit CARD Act, which was enacted in May 2009. Among other things, the final rule:

The final rule will generally go into effect on August 22, 2010. The press release and the Federal Register notice are available at: External Link