OCC Issues Guidance on Overdraft Protection Programs

WASHINGTON—The Office of the Comptroller of the Currency (OCC) today issued guidance to address the risks associated with bank overdraft protection programs.

The guidance provides background information on overdraft protection programs and identifies certain practices that may result in heightened risk exposure. These practices include assessing overdraft fees on “authorize positive, settle negative” transactions and assessing a fee each time an item is presented for payment after it was returned for non-sufficient funds (representment fees). The guidance also describes several practices that may help banks control risks associated with overdraft protection programs, as well as compliance with section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices.

The OCC recognizes that some banks have announced changes to their overdraft protection programs consistent with appropriate risk management practices. When supported by appropriate risk management practices, overdraft protection programs may assist some consumers in meeting short-term liquidity and cash-flow needs. The OCC also encourages banks to explore offering low-cost accounts, as well as other lower cost alternatives for covering overdrafts, such as overdraft lines of credit and linked accounts.

The guidance is consistent with the OCC’s mission to ensure that banks operate in a safe and sound manner, provide fair access to financial services, treat customers fairly, and comply with applicable laws and regulations.

Related Links

• OCC Bulletin 2023-12, “Overdraft Protection Programs”
• OCC Bulletin 2010-15, “Overdraft Protection: Opt-In Requirements and Related Marketing Issues”
• OCC Bulletin 2005-9, “Overdraft Protection Programs: Interagency Guidance”