Jump to Content
ABA: The American Bankers Association
Skip Section Navigation

May a bank pay an overdraft and waive overdraft fees for a bank director's spouse, especially if would not normally waive the fee for any other customer?

This is one of those issues where it may be prudent to treat the overdraft as a covered transaction under Regulation O even if it technically may be exempt. The overdraft provisions under Regulation O’s §215.4(e) apply only to overdrafts of an executive officer or director but not to their “related interests" or those who may be otherwise associated with the person (e.g., their spouse). However, the situation described must also be taken in context with the “tangible economic benefit rule” addressed in §215.3(f) stating that an extension of credit (which includes overdrafts) is considered made to an insider if the proceeds are used for the benefit of the insider. This raises questions if, for example, the overdraft occurs on an account of the insider’s spouse, given the difficulty in proving or disproving who received the benefit. Therefore, unless other details indicate that the overdraft is in no way related to the insider, it may be easier to, by policy or otherwise, not show favoritism in making the decision to pay or return the item as well as to impose the standard overdraft fee. (August 2018)

Compliance Hotline

Have a compliance-related question? We're here to help. Members, reach us by phone or email.