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Waiting for Overdraft Legislation? Embrace Reform Now or Face the Risks

By Cheryl Lawson, EVP of Compliance Review, ADVANTAGE

June 2023

Will there be any overdraft legislation passed or CFPB guidance published in the near future? Nobody knows. But what we do know is that all corners of the industry seem to be saying essentially the same thing: Reform your overdraft program so it’s more consumer-friendly or put yourself at risk.

The FDIC, the OCC and the NCUA have all issued statements urging their members to take a closer look at their overdraft programs now, if they haven’t already done so. Common themes among these statements are:

  • Ensuring correct practices and clear disclosures surrounding “authorize positive, settle negative” (AP/SN) transactions and re-presentment fees;
  • Offering more ways for consumers to avoid overdraft fees (such as a de minimis amount and grace period); and
  • Avoiding “surprise” fees through greater transparency.

Getting on the Right Track

As Acting Comptroller of the Currency Michael Hsu recently stated, the goal for financial institutions is not to eliminate this valuable service and its associated fees, but rather to update their overdraft solution to make it more friendly to consumers and avoid regulatory risk.

So even though there is no new overdraft legislation at the moment, when we read between the lines there is still action needed by banks and credit unions to stay within regulatory expectations.

The simple place to start is to have an objective, third-party review your current overdraft program to uncover areas that could be construed as deceptive to consumers and/or leave you more susceptible to regulatory risk and litigation.

A Pro-Consumer Overdraft Review from the experts at JMFA can help you determine if your overdraft program checks all the boxes when it comes to best practices and compliance. Connect with ADVANTAGE to get started.


ADVANTAGE, powered by JMFA, is dedicated to empowering financial institutions with strategic solutions for growth and success. Our comprehensive services include overdraft program consulting and compliance, checking account acquisition strategies, contract negotiation expertise, and consulting for technology strategy, evaluation and selection. With a rich history of serving credit unions nationwide, we are committed to delivering exceptional value and fostering long-lasting partnerships. Choose ADVANTAGE, to elevate your performance, identify new opportunities, and build more value.