Each depositor insured to at least $250,000 per insured bank

Fall 2010

FDIC Issues Guidance to Banks on Overdraft Costs, Usage

As previously reported, new rules require banking institutions to give customers an opportunity to agree in advance ("opt in") before any fee can be charged to cover one-time overdrafts - transaction amounts that exceed the available funds in the account - at sales terminals and ATMs.

In addition, on November 24, the FDIC issued guidance to the more than 4,700 institutions we supervise (mostly small "community banks") setting out the agency's expectations for how they should closely oversee any overdraft payment programs. The guidance focuses on ways to help keep consumers from regularly turning to automated overdraft payment programs that make it easy to incur multiple overdrafts, often in a single day, and result in hundreds of dollars in fees. "While many community banks already prudently manage their overdraft programs, some banks operate automated programs that lead to excessive use of these high-cost, short-term credit products," said FDIC Chairman Sheila C. Bair.

Among other things, the FDIC guidance encourages banks to discuss less costly alternatives with affected consumers, institute appropriate daily limits on customer costs, and ensure that transactions are not processed in a manner designed to maximize the fees. It is expected that banks would institute any additional policies and procedures consistent with the new guidance by July 1, 2011. For more details, read the FDIC press release.

For tips on keeping overdraft costs down, see Bank Accounts Are Changing: What You Need to Know.