Illinois Bankers Association Offers Tips for Consumers on New Overdraft Rule
New Law Requiring Opting-in for Overdraft Protection Takes Effect
SPRINGFIELD, Ill., July 16 /PRNewswire-USNewswire/ -- Illinois consumers and merchants need to be aware of a new federal rule that could lead to a significant increase in denied debit card transactions at a point of sale. All financial institutions are required to comply with this new rule.
On July 1, 2010, an amendment to the Federal Reserve Board's "Regulation E" regarding electronic fund transfers went into effect. It requires consumers to opt-in to their financial institution's overdraft protection program for ATM and one-time debit card transactions before overdraft fees may be assessed on the account. In the past, many financial institutions automatically enrolled their customers in an overdraft protection program for all types of transactions. Going forward, financial institutions will be forced to stop assuming the risk involved in covering overdrafts involving ATM and one-time debit card transactions, unless consumers choose to opt-in to this service. (These changes do not apply to overdraft programs involving checks and automatic bill payments.)
Failure to opt-in to your financial institution's overdraft protection program means that an attempt to make a purchase with a debit card may be denied at the point of sale if you have insufficient funds in your account.
Overdraft protection programs offered by financial institutions provide consumers with protection against denied transactions. This service often involves a fee charged to the account holder to cover ATM and debit card transactions when there are inadequate funds in the account. Under the new rule, if an account holder has not opted-in to an overdraft program, and there are not enough funds in the account to cover an ATM or debit transaction, a fee cannot be charged and the transaction may be denied. For new accounts, the opt-in deadline is July 1, while existing account holders have until August 15 to opt-in, after which there can be no automatic overdraft protection offered until an opt-in request is received.
To help Illinois consumers better understand the new regulation and their options, the Illinois Bankers Association offers the following tips and information:
Options for Account Holders
- Opt-in: If your bank has a practice of paying overdrafts for ATM and everyday debit card transactions, it will likely offer the option to opt-in to its overdraft protection program. Account holders will receive a notice with directions on how to opt-in. You can also call or visit your bank to help you better understand the process. If you decide to opt-in, you still will have the option to opt-out (cancel) at any time.
- If You Don't Opt-in: If you do not want to opt-in to an overdraft protection program, you do not have to do so. However, if you do not opt-in, your ATM or one-time debit card transactions may be denied if there are inadequate funds in your account. There often are other choices made available by financial institutions to protect against insufficient funds in an account. Many banks provide the option to link a checking account to a savings account or a line of credit. Call or visit your bank to inquire about your overdraft protection options. If you choose not to opt-in at this time, you can opt-in at any time in the future.
Avoiding Overdrafts
The best and easiest way to avoid overdraft fees is to keep track of your transactions and your account balance. If you keep extra money in your account -- a cushion -- you will be less likely to overdraw your account. Some banks offer to send you an alert by phone, e-mail or text message if your balance falls below a designated amount. Check with your bank to find out what options are available to you.
More information on the new overdraft rule is available on the Federal Reserve's consumer information website at www.federalreserve.gov/consumerinfo/wyntk_overdraft.htm.
About The Illinois Bankers Association
The Illinois Bankers Association is a full-service trade association dedicated to creating a positive business climate that benefits the entire banking industry and the communities they serve. Founded in 1891, the IBA brings together state and national banks, savings banks, and savings and loan associations of all sizes in Illinois. Collectively, the IBA represents nearly 90 percent of the assets of the Illinois banking industry, which employs more than 100,000 men and women in over 5,000 offices across the state. More information is available at www.ilbanker.com.
SOURCE Illinois Bankers Association
WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?
Newsrooms &
Influencers
Digital Media
Outlets
Journalists
Opted In
Share this article