OCC Revises Guidance Regarding Consumer Protection Requirements to Overdraft Lines and Protection Services

OCC Overdraft Bank Compliance Regulation Z

As previously reported in our March 11 Special Alert Update, on March 6, 2015, the OCC issued its revised “Deposit-Related Credit” booklet (“DRC booklet”) of the Comptroller’s Handbook, which replaced the “Deposit-Related Consumer Credit” booklet issued on February 11, 2015 (previously covered in this Special Alert).  While the new booklet covers the same products – check credit (overdraft lines of credit, cash reserves, and special drafts), overdraft protection services, and deposit advances – the OCC made significant amendments to scale back the provisions of the prior version.  Specifically, the new DRC booklet no longer contains supervisory principles that could be read to require that banks provide substantive consumer protections that are not currently required by the applicable consumer protection regulations.   For example, the DRC booklet no longer requires that banks:

• only enroll customers into an overdraft protection service if they have affirmatively requested that product;
• ensure the ability to repay for all applicants enrolled in an overdraft protection service; and
• ensure that any fees charged in connection with an overdraft protection service are reasonably related to the program’s costs and associated risks.

In making these changes, the OCC requires supervisors to assess DRC products more in line with existing consumer protection laws.  The OCC states as much in OCC Bulletin 2015-17, which announced the DRC booklet.  There, the OCC acknowledges that the DRC booklet “is intended as a summary restatement of existing laws, regulations, and policies [and] ... [n]othing in this booklet should be interpreted as changing existing OCC policy.”