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Financial Institution Letter
Overdraft Payment Programs and Consumer Protection Final Overdraft Payment Supervisory Guidance
Summary: The FDIC is issuing the attached final guidance, which reaffirms existing supervisory expectations with respect to overdraft payment programs generally, and provides specific guidance with respect to automated overdraft payment programs. The FDIC expects the institutions it supervises to closely monitor and oversee any overdraft payment programs they offer to consumers, including taking appropriate measures to mitigate risks, incorporating the best practices outlined in the attached 2005 Joint Guidance on Overdraft Protection Programs , and effectively managing of third-party arrangements. Management should be especially vigilant with respect to product over-use that may harm consumers, rather than providing them the protection against occasional errors or funds shortfalls for which the programs were intended. 



The FDIC expects financial institutions' boards of directors and management to ensure that the institution mitigates the risks associated with offering automated overdraft payment programs and complies with all consumer protection laws and regulations, including providing clear and meaningful disclosures and other communications about overdraft payment programs, fees, and other features and options, and demonstrating compliance with new opt-in requirements for automated teller machine (ATM) withdrawals and one-time point-of-sale debit card transactions. In addition, the FDIC expects financial institutions to:

  • Promptly honor customers' requests to decline coverage of overdrafts (i.e., opt-out) resulting from non-electronic transactions;
  • Give consumers the opportunity to affirmatively choose the overdraft payment product that overall best meets their needs;
  • Monitor accounts and take meaningful and effective action to limit use by customers as a form of short-term, high-cost credit, including, for example, giving customers who overdraw their accounts on more than six occasions where a fee is charged in a rolling twelve-month period a reasonable opportunity to choose a less costly alternative and decide whether to continue with fee-based overdraft coverage;
  • Institute appropriate daily limits on overdraft fees; and consider eliminating overdraft fees for transactions that overdraw an account by a de minimis amount; and
  • Not process transactions in a manner designed to maximize the cost to consumers.

Institutions using a third-party vendor for their overdraft payment programs must exercise careful oversight, as discussed in the FDIC's 2008 Guidance for Managing Third-Party Risk . The FDIC will take supervisory action where overdraft payment programs pose unacceptable safety and soundness or compliance management system risks or result in violations of laws or regulations, including unfair or deceptive acts or practices and fair lending laws.

Positive CRA consideration will continue to be provided for responsible transaction accounts, and affordable small-dollar loan programs or other lower cost credit alternatives, particularly for low- and moderate-income consumers.

In order to allow sufficient time for institutions to review, consider and respond to the expectations in the final guidance, the FDIC expects that any additional efforts to mitigate risk would be in place by July 1, 2011.

FDIC-Supervised Institutions 

Suggested Routing: 
Chief Executive Officer 
Compliance Officer 
Chief Lending Officer 

FDIC financial institution letters (FILs) may be accessed from the FDIC's Web site at 

To receive FILs electronically, visit 

Paper copies of FDIC financial institution letters may be obtained via the FDIC's Public Information Center (1-877-275-3342 or 703-562-2200). 


Additional Related Topics:

  • Joint Guidance on Overdraft Protection Programs
  • Federal Trade Commission Act Unfair or Deceptive Acts and Practices provisions and Regulation AA
  • Guidance For Managing Third Party Risk
  • Truth in Lending Act and Regulation Z
  • Truth in Savings Act and Regulation DD
  • Electronic Fund Transfer Act and Regulation E
  • Equal Credit Opportunity Act
  • Supplemental Information
Related Topics
Community Reinvestment Act
Last Updated: November 24, 2010