By Dianne Bufford / Liberty Bank of Arkansas / Springdale

Opt-in or Opt-out?  What is that about?

If you have a bank account and use your ATM/debit card, you have probably received correspondence recently from your bank informing you of new federal rules.

These rules prohibit financial institutions from charging consumers fees for paying overdrafts on ATM transactions and one-time debit card transactions, unless a consumer “consents,” or OPTS IN, to the overdraft service for those types of transactions. This opt-in requirement does not apply to check, ACH or recurring debit card transactions.

These changes were announced by the Federal Reserve Board last November. They were made to Regulation E, which implements the Electronic Funds Transfer Act and affects the way financial institutions conduct business, specifically by limiting fees that can be charged for overdrafts for certain transactions. The rule became effective July 1 for new accounts, and will become effective Aug. 15 for existing accounts.

According to Federal Reserve Chairman Ben S. Bernanke, “The final overdraft rules represent an important step forward in consumer protection. Both new and existing account holders will be able to make informed decisions about whether to sign up for an overdraft service.” 

In short, the rule gives the consumer the choice to be provided with overdraft service on these items. 

Opting IN authorizes the bank to pay the overdraft items on ATM/debit card transactions, and allows the bank to charge an overdraft fee to provide that protection. To some, Opting IN will provide a safety net and save them the embarrassment of having a transaction declined at the cash register. 

 Opting OUT means that, starting Aug. 15, should a transaction occur that would cause an overdraft due to insufficient funds, the ATM/debit card transaction will be declined at the register.

Your bank is required to follow the Opt-IN procedures and disclosures. You must be provided with a “reasonable” opportunity to consent – meaning enough time to make your decisions about Opting In or Out. Your bank may have sent to you a letter, given you a number to call, provided online access on the bank’s website, or a form to sign and return. For more specifics and clarification on these rules and procedures, contact your local bank.

Dianne Bufford is the Northwest Arkansas marketing director for Liberty Bank of Arkansas. E-mail Dianne at DBufford@mylibertybank.com.