ATTORNEY GENERAL

The Attorney General provides Consumer Alerts to inform the public of unfair, misleading, or deceptive business practices, and to provide information and guidance on other issues of concern. Consumer Alerts are not legal advice, legal authority, or a binding legal opinion from the Department of Attorney General.

new overdraft fee rules - 2010

The Federal Reserve Board has enacted new rules that prohibit banks from charging overdraft fees for ATM withdrawals or debit card purchases when a consumer does not have sufficient funds to cover the transaction, unless the consumer has affirmatively consented to the bank's overdraft protection service for those transactions. Overdraft protection service refers to a bank covering or paying an ATM withdrawal or debit card purchase that overdraws the consumer's account. Consumers are generally charged a fee for this service. If consumers choose not to have overdraft protection, transactions that would have caused their accounts to go into a negative balance will be declined.

These new rules apply to new and existing accounts. For accounts that were opened prior to July 1, 2010, the new rules go into effect August 15, 2010. The new rules go into immediate effect for accounts opened on or after July 1, 2010.

Banks must provide notice of overdraft protection services to consumers.

Before opting in to a bank's overdraft protection service for ATM withdrawals and debit card purchases, consumers must be provided written notice. In addition to explaining the overdraft fees, the notice to consumers must explain their right to affirmatively consent to payment of overdrafts for ATM withdrawals and debit card purchases. Further, if the bank offers, as an alternative for bank payment of overdrafts, a line of credit or a service that transfers funds from another account, that information must also be included in the notice to consumers. If a consumer does not respond to the notice by affirmatively consenting to overdraft protection, overdrafts will not be paid by the bank.

The consumer may opt in to the overdraft protection service at any time in the manner described in the notice. The consumer may also revoke consent at any time. The consumer's affirmative consent to the bank's overdraft protection service remains effective until revoked by the consumer or until the bank terminates the service.

Banks may not discriminate against consumers who choose not to opt in to the overdraft protection service for ATM withdrawals and debit card purchases.

These new rules only apply to overdraft fees resulting from ATM withdrawals or debit card purchases. Banks may not require consumers to accept overdraft protection for ATM withdrawals and debit card purchases as a condition for the payment of any overdrafts for checks or other types of transactions. Further, a bank may not decline to pay checks, ACH transactions, or other types of transactions that overdraw the consumer's account because the consumer has not affirmatively consented to the bank's overdraft protection service for ATM and debit card transactions. Additionally, a bank must provide to consumers who do not affirmatively consent to the bank's overdraft protection for these transactions the same account terms, conditions, and features that it provides to consumers who affirmatively consent, except for the overdraft service for ATM withdrawals and debit card purchases.

CONTACT THE ATTORNEY GENERAL'S CONSUMER PROTECTION DIVISION

Consumers may contact the Attorney General's Consumer Protection Division at:

Consumer Protection Division
P.O. Box 30213
Lansing, MI 48909

517-373-1140
Fax: 517-241-3771

Toll free: 877-765-8388