CFPB Circular 2024-05: Improper Overdraft Opt-In Practices

NASCUS Summary re: Consumer Financial Protection Circular 2024-05: Improper Overdraft Opt-In Practices
September 17, 2024 

Click here to read the CFPB Circular

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Question Presented

Consumer Financial Protection Circular 2024-05 answers the question: Can a financial institution violate Regulation E if there is no proof that it has obtained a consumer’s affirmative consent before levying overdraft fees for ATM and one-time debit card transactions?

Response

Yes. Regulation E’s overdraft provisions establish an opt-in regime where the default condition is that consumers are not enrolled in covered overdraft services.  Financial institutions are prohibited from charging fees for such services until consumers consent to enrollment.  Violations of these requirements can be proven by showing evidence that a consumer was charged an overdraft fee on a covered transaction where the available evidence does not adequately validate the consumer opted in.

Institutions are required to provide consumers with written or electronic notices describing the institution’s overdraft services prior to opt-in and to provide consumers with confirmation of the consumer’s consent to enrollment in writing or electronically with a notice informing the consumer of the right to revoke such consent.  These rules do not apply to overdraft fees charged on written checks, recurring debit transactions or ACH transactions.

The circular also provides examples of the forms of records that an institution may use to demonstrate consumer consent to enrollment.  The circular notes that the form of consent may vary according to the channel through which the consumer opts into covered overdraft services.