OCC, Board, FDIC, OTS, NCUA: Interagency Guidance on Overdraft Protection Programs

ABA Contact: Nessa Feddis
Published: June 7, 2004 Federal Register
Comments Due: August 6, 2004
Disposition: Filed August 6, 2004

Final guidance:
OCC, Board, FDIC and NCUA:
February 24, 2005 Federal Register
OTS: February 18, 2005 Federal Register


The banking agencies have proposed interagency guidance on overdraft protection programs to assist depository institutions in the responsible disclosure and administration of overdraft protection services. The agencies distinguish among overdraft lines of credit, the traditional practice of paying overdrafts on a discretionary basis, and recent overdraft protection programs that offer an express overdraft limit.  Example of the characteristics of the latter are provided.

The agencies are concerned about how well the features, conditions, and fees of these recent overdraft protection programs are disclosed and about sometimes aggressive promotion. The proposed guidelines are divided as follows:

  • Safety and Soundness
  • Legal Risks
  • Best Practices

Related Regulation DD (Truth in Savings Act) amendments were proposed the same day.

ABA Comments

ABA generally agrees with much of the proposed Guidance. Many of the recommendations are appropriate and fair and will help ensure that consumers understand overdraft policies and fees. Many reflect ABA's own suggestions to its members, provided in a variety of media.

While we generally agree with the proposed Guidance, we believe that the agencies' Guidance will only be useful so long as it is not misinterpreted as mandatory or that failure to comply with one or more of the guidelines is necessarily deemed to be unfair or deceptive. In addition, we suggest that the Agencies address internal inconsistencies and make more clear the distinctions among the various practices and programs so that is clear that the Guidance is addressing only programs that are promoted and for which a discretionary limit is disclosed. The Guidance should also recognize the discretionary nature of overdraft payments and not classify discretionary limits as "commitments" nor require the disclosure of instances when the overdraft will not be paid. We have also made suggestion to specific sections of the Guidance.


The OCC, Federal Reserve Board, FDIC, and NCUA published joint guidelines. The OTS issued its guidelines separately (February 18, 2005). The joint guidelines indicated that one of the agencies' primary concerns about bounce protection programs is how they are sometimes promoted, as some promotions suggest overdrafts are simply short term loans and may inappropriately encourage overdrafts. In addition, the agencies noted that some consumers, unaware of the bank's practice of paying overdrafts on noncheck transactions, such debit cards, may unwittingly overdraw their accounts. Accordingly, the agencies warn banks about how the programs are promoted and explained to ensure that consumer understand how they work. The joint guidelines address: safety and soundness concerns; legal risks, and best practices. The OTS final regulations only addressed safety and soundness concerns and best practices.

2004 Regulations Chart
Federal Register
Comment Letter

Questions? Please contact Nessa Feddis for more information.