NCUA Interim Final Rule Clarifies Regulation DD Overdraft Protection Rules •
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The National Credit Union Administration (NCUA) has issued an interim final rule that clarifies the recent final rules amending Regulation DD, the Truth in Savings Act (TISA); that changed the disclosure requirements for overdraft protection plans. Compliance with these recent rules was required as of January 1, 2010. The Federal Reserve Board recently issued substantially similar clarifications to its TISA rules. Under TISA, NCUA must issue rules that are substantially similar to the Fed’s rules. The only differences permitted would be those that address the unique nature of credit unions and the limitations in which they pay dividends on member accounts. Here are the clarifications for the Regulation DD rules: o NCUA is adding language to clarify that the overdraft disclosures are required on the periodic statements and eliminating language that addresses the disclosures for credit unions that promote the payment of overdrafts since these disclosures now apply to all credit unions. o The proposal clarifies that the term “Total Overdraft Fees” must be used on the period statement when describing the total amount of fees imposed for paying overdrafts. o For balance information that is disclosed through an automated system, the rules require that it not include the amount available that the credit union may provide to cover items, including amounts available under an overdraft program. The proposal clarifies that amounts available under a retail sweep account can, however, be included in the disclosed balance information. In a retail sweep program, a credit union establishes two legally distinct subaccounts, a share draft subaccount and a share savings subaccount, which together make up the member’s account. The credit union allocates and transfers funds between the two subaccounts in order to maximize the balance in the share savings subaccount, while complying with the monthly limitations on transfers out of savings accounts under the Federal Reserve’s Regulation D. o The rules allow disclosure of an additional balance that is available through an overdraft program, line of credit, or transfer from another account, as long as it is prominently disclosed that this second balance includes this additional amount. The rules indicate that the second balance may not be disclosed if it is in connection with an overdraft service if the consumer has opted-out of the service. The proposal clarifies that this also includes when the consumer has not opted-in when the opt-in is required for the service. If the additional funds are not available for all types of transactions, then this must also be disclosed along with the additional balance. o The clarifications also include a minor technical correction to the format of the aggregate overdraft and returned item fees sample form.
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The clarification with regard to the use of the term “Total Overdraft Fees” will be effective as of October 1, 2010 while the other clarifications will be effective as of September 7, 2010.
Comments are due to NCUA by October 4, 2010; please submit your comments to LSCU by September 17, 2010. Please e-mail your comments to Bill Berg, Vice President of Regulatory Affairs at william.berg@lscu.coop and/or Scott Morris, Director of Compliance at scott.morris@lscu.coop. You may also contact Bill or Scott at 866.231.0545 x1028 or 2165 respectively, if you have questions or if you would like a copy of the proposed clarifications you may access it here.
QUESTIONS TO CONSIDER REGARDING THE REGULATION DD CLARIFICATIONS •
Do you agree with the clarifications? What other clarifications should have been included?
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Do you believe the October 1, 2010 effective date is appropriate for purposes of complying with the requirement to use the term “Total Overdraft Fees” on periodic statements, especially for credit unions that have been using a different term? If not, what should the effective date be?
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Other comments?
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