ABA Banking Journal - June 2012 - (Page 41)

compliance clinic | CHECKING-BASED PROGRAMS Update on overdraft and deposit advance programs Treading carefully when customers run short on checking funds by steve cocheo, executive editor PhoTo: Slavoljub PanTelic/ShuTTerSTock.com I f you needed $20 to tide you over until payday and borrowed from a friend or co-worker, a day or two later the debt would be settled, cost-free, and nothing further would be said. Chances are, you’ve done the same for your buddy, with no resort to so much as an IOU. When the source of temporary funds is a lending institution, things aren’t that simple—banks take risks and provide services, and have to earn something for doing so. In spite of federal legislation dealing with debit-based overdrafts, industry best-practices standards, and guidances finalized or proposed by federal regulators, overdraft protection programs continue to draw debate and controversy. In early May, for example, Rep. Carolyn Maloney (D.-N.Y.), introduced legislation that would expand the kinds of opt-in requirements placed on debit-based overdrafts by the Federal Reserve’s 2010 rule to check, ATM, and recurring-payment overdrafts. In addition, Rep. Maloney’s bill would impose mandatory caps on the num- ber of overdrafts and require all overdraft fees to be “reasonable and proportional” to the amount of the overdraft. In late February, the Consumer Financial Protection Bureau launched an inquiry into overdraft programs that is expected to produce a report, perhaps with recommendations for regulatory action, by the end of 2012. Many banks continue to offer overdraft programs in some form and customer usage remains strong. More recently, the Comptroller’s Office, the CFPB, and others in Washington addressed a less common means of advancing funds to consumers through checking accounts, the “direct deposit advance loan.” Offered by a handful of mostly larger banks, this service offers short-term, small-dollar loans that are an advance on regularly scheduled direct deposit payments such as salary or Social Security. The following Q&A is based on an interview with ABA’s Virginia O’Neill, senior counsel, and Nessa Feddis, senior counsel, juNE 2012 | AbA bANKiNG JourNAL | 41

Table of Contents for the Digital Edition of ABA Banking Journal - June 2012

ABA Banking Journal - June 2012
Contents
Chairman’s View
Editor’s Column
The Economy
Bank Notes
Picture This
ABA Community Banking: A purpose-built bank
Pass the Aspirin
Tech Topics
Science of the complaint
Top-performing community banks
Compliance Clinic
ABA Resources
Legal Issues
First Person

ABA Banking Journal - June 2012

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