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FDIC Offers Clarifications on Overdraft Expectations

Posted on 3/30/2011

FDIC staff yesterday clarified aspects of the agency's controversial November 24 financial institution letter that detailed how banks should implement and maintain oversight of automated overdraft payment programs. The comments were made during an FDIC webinar on the letter, and they are expected to be included in a Q&A to be published later this week.

Among other things, the FDIC indicated that bank outreach to "chronic or excessive" overdraft program users could be conducted by phone, in-person or by mail as long as it represented a meaningful opportunity to present the customer with existing bank alternatives to covering account overdrafts.

This expansion of the methods banks can use to contact customers responds to concerns ABA raised in a January letter to the agency. FDIC also emphasized that the FIL does not require banks to cut off the overdraft service during this process or to offer alternatives the bank does not already have available.

While this appears to provide more flexibility, the FDIC staff reiterated that banks still must initiate contact with customers after they incur six overdraft fees in a rolling 12 month period, and that banks should introduce daily limits on the number of overdraft fees that a customer can incur.

ABA will provide an analysis of the FDIC's Q&A when it is issued. Read the FDIC's overdraft letter. Read ABA's letter.


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