5
overdraft programs facing review | | By Laura
Bruce • Bankrate.com |
| The FDIC is proposing a study of the following
five overdraft protection programs offered by financial institutions and the extent
to which customers are using them. If you have or are considering overdraft protection,
you should make sure you know what you have and what the provisions of that protection
mean to you.
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5 overdraft programs facing review: | |
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1.
Linked transfer accounts
These are contractual agreements between a bank and a customer,
linking the customer's transactions account with other accounts
within the bank, including savings and credit card accounts. In
the event of an overdraft, the bank will fulfill the customer's
obligations by transferring funds from the customer's other accounts
linked to his transactions account.
2. Overdraft lines of credit
Overdraft lines of credit are contractual agreements between a bank
and a customer that the bank is willing to lend up to a specified
amount over a specified future period to cover overdrafted items.
These programs DO NOT include line of credit programs that do not
specifically cover overdrafted items, for example, home equity lines
of credit. The bank extends the line of credit after reviewing a
customer using standard underwriting criteria; the line is considered
a loan and requires standard Truth-in-Lending (Regulation Z) disclosures.
3. Automated
promoted overdraft programs
A program or policy where a bank generally honors a customer's overdrafted
obligations is an automated promoted overdraft program; however,
customers are informed of the existence of the overdraft protection
program. The program is uniformly offered to qualifying customers.
Excluded are all overdraft programs where APR is required. The program
is automated in the sense that standardized procedures or a "matrix"
is used to determine whether the NSF item qualifies for the overdraft
protection. Automated programs are typically, but not necessarily,
computerized.
4. Automated,
nonpromoted overdraft protection
These are programs or policies where a bank generally honors a customer's
overdrafted obligations; however, customers are NOT informed of
the existence of the overdraft protection program. The program is
automated in the sense that standardized procedures or a "matrix"
is used to determine whether the NSF item qualifies for the overdraft
protection. Automated programs are typically, but not necessarily,
computerized.
5.
Nonautomated nonpromoted ad hoc overdraft protection
These include
truly incidental and discretionary accommodations to customers by banks to honor
overdrafted items. These decisions are made independent of or override the programs
described in (1) through (4). Source: FDIC | 
