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ICBA Wants Consumers to be Aware of New Overdraft Rules For ATM and Debit Card Transactions

Washington, D.C. (June 29, 2010)—The Independent Community Bankers of America (ICBA) and the nation’s nearly 8,000 community banks want consumers to be aware of new rules that will go into effect this summer governing overdraft coverage and fees. These rules prohibit financial institutions from charging overdraft fees on ATM withdrawals and debit card purchases unless the consumer has opted into the overdraft coverage service. The new rules take effect July 1 for new accounts and Aug. 15 for existing accounts.

“Sometimes consumers need the convenience and protection that overdraft coverage offers. Under these new rules, if community bank customers wish to continue to receive this service, all they have to do is let their bank know they want to keep on receiving overdraft coverage and are willing to pay the relevant fee,” said Jim MacPhee, ICBA chairman and CEO of Kalamazoo County State Bank in Schoolcraft, Mich.

Under the new rules, consumers must be given an explanation of their bank’s overdraft payment services, including any relevant fees. Customers will only receive overdraft coverage on ATM withdrawals and debit card purchases if they actively choose to opt in, and they are free to change their minds and opt out even after signing up for the service. Community banks still maintain the ability to pay or return items that create the need for an overdraft of the customer’s account and charge a fee for the returned item.

It is also important for consumers to know that no community bank will discriminate against those customers who choose not to opt in for overdraft services.

Still, the best protection against unnecessary fees is to manage your account wisely. ICBA offers these tips to help consumers avoid overdraft situations:

  • Keep an eye on your account balance prior to withdrawing cash or using your debit card. Prevention is your best medicine.
    • Review your transactions on an ongoing basis.
    • Use services, such as online banking, your bank may provide to help you keep up-to-date with your balance.
    • Remember to record and deduct checks, automatic recurring payments and debit card transactions and to add any deposits that have not yet been posted to your account.
    • Do not use your debit card as you would use a credit card. Your debit card is like an electronic check and the funds are automatically deducted from your account.

  • Ask your bank about all of its overdraft services. Community banks generally offer other types of overdraft services, such as overdraft lines of credit and transfers or sweeps from a savings account or another checking account.
    • Overdraft lines of credit charge interest but provide a safety net. They may also have transaction and/or annual fees. If needed, disbursements can be repaid over a period of time.
    • Transfer or sweep arrangements from another account, such as a savings account, allow customers to cover overdrafts using their own funds for a small transaction fee.
    • Many times a bank may also pay an overdrafted check or preauthorized debit to avoid consumers having the inconvenience of returned transactions, which include embarrassment, fees and hassles from merchants. While the bank usually charges a fee for this service, they also charge the same fee for the returned transaction.
    • Talk to your community banker about the best choice(s) for you.

“Community bankers are committed to providing our customers with the information they need to make well-informed decisions about managing their finances. If you have any questions or if you can’t decide whether to opt in, the best person to talk to is your community banker, who can explain the new rules and how they will benefit you,” MacPhee said.

For more information about ICBA, visit www.icba.org. To find a community bank, visit ICBA’s community bank locator by clicking here.