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Overcoming Overdraft Regulations

by Mark Singleton


In the past 12-months I have spent a trunk load of money on car insurance, even though I’ve had no accidents.  In that same period my medical insurance has cost me an arm and a leg, but my doctor says my arms, legs and rest of my body are very healthy.  Home insurance costs a lot, but I’ve never made a claim in regard to my house.


All of those safeguards against unexpected problems cost money whether I get sick, have an accident, or a tornado takes off my roof.  Wouldn’t it be nice to have an insurance policy that would give you great protection but didn’t cost you a single dime if you never had to use it?  Well, THERE IS that sort of benefit offered at almost every bank in America. 


That exceptional advantage banks can give you is called overdraft protection.  And unlike auto, home or health insurance, overdraft protection doesn’t cost a thing if you don’t use it. Only if you use it, is there a fee assessed.  However, if you don’t tell your bank that you want this type of safety net by August 15th,  then Uncle Sam is making banks assume you don’t want overdraft protection on your everyday debit card and ATM transactions. 


In other words, even if you are smart enough to currently have overdraft protection, if you don’t inform your bank that you want to continue the benefit, the government (through what is called Regulation E) is going to force your bank to drop your coverage.  Now, more than ever, you need every protection you can get.


I’ve heard some customers say they never, ever have experienced an overdraft.  That may change under the new Reg. E. 


Let’s suppose you have $30 in your checking account.  That’s plenty of money because you are going to make a deposit right after you have lunch with some friends.  You are wise to the ways technology has changed banking in the last decade and the good old times of 2-3 day float are long gone.  But, you figure you are still safe at least until your bank closes for the day.


The bill comes and its only $25 for you and your friends and you decide to treat today because you know its covered at your bank.  Problem is, you haven’t figured in the tax or tip, which will put the total bill a little over your available checking account funds.  It’s an “oops moment” that most of us have every once in awhile.


If that happened today, CNB of Texas would approve your transaction and cover your overdraft.  In fact, if you made your deposit as you planned before 7 PM that day, you would not even be charged an overdraft fee.  Citizens National Bank would cover you, just like most independent banks.


But after August 15th, every bank in the U.S. will not be able to cover you or approve your transaction unless you expressly “Opt In” by confirming that you want overdraft protection.  Why, because the Federal Government is changing the rules in regard to debit cards and ATM transactions. 


What this means is that even if your bill is 1¢ over what you have in your bank account at lunchtime, right in front of all your friends, the waiter is going to tell you that your debit card purchase is denied.  It will happen in grocery lines, it will happen when you least expect it, and it will happen, according to Murphy’s Law, at the most embarrassing moment possible.


At CNB of Texas, within the last year, we have had about 33% of our non-business customers dip into their overdraft limit when they didn’t have the money in their account to cover their purchase and in some instances, they did not incur an overdraft fee. That means that more than one out of three customers COULD HAVE FACED the situation I described happening at the restaurant with friends.  Ouch!


 Even the remaining 67% of our customers that have never had an overdraft could be denied a purchase of a product or service under the new federal rulings.  If your account balance dips below $200 you have probably accessed your overdraft limit without ever knowing it or incurring a fee because you made a deposit by 7 PM that same day.  Since it’s free if you don’t use it, it is a no-brainer.  It’s just one of the many tools banks provide their customers to fight the onslaught of rules and regulations mandated by our representatives in Washington.


What CNB of Texas has done, as well as most banks, is give customers a load of different free services to always keep track of their checking account balances.  Our customers can keep tabs on their account levels through multiple channels:


·         Online Banking – see real time balance information almost 24 hours a day.

·         ATM – find out your available balance at any ATM across the nation… without the overdraft protection amount added.

·         Debit Card Alerts – receive an email or text message every time your debit or ATM card is used.

·         Q-Cards – set up an email notifications when your account goes above or below specified amounts.

·         Telebanking – call our automated line to find out your account status.

·         Customer Contact Center – talk to a live banker 7-days a week.


Most community banks are not just out trying to charge you an overdraft fee for a $5.00 cup of coffee, a $3.00 hamburger and/or an $8.00 purchase at the convenient store when your account becomes overdrawn.   We want to promote responsible account management to help you avoid racking up multiple overdraft fees and gain customers for life.  We believe customers completely understand what their account balance is and yet still choose to buy the above items knowing the costs associated with overdrafting their account.   We want to provide the financial buffer to allow customers to do what they want, but still ask that they try and be responsible…and yes pay the cost associated.    


The vast number of all our customers has overdraft protection even when they may never, or very seldom, use it.  But the U.S. government, in its wonderful wisdom, is saying that isn’t good enough.  You must contact your bank before August 15th and tell them once again that you want to continue receiving the service.  If not, you will automatically lose it on August 15th.


The FED calls it Reg. E, but I call it insulting.  You are already smart enough to have chosen to have the safeguard to protect yourself against any unfortunate lapse in funds and Uncle Sam says you must do it all over again.  We are working hard, like all banks, to get the message out to everyone by August 15th.


I encourage you to go online to your bank’s Internet site, or call, or stop-in and advise them that you want to take advantage of the overdraft protection benefits your bank offers you.  Even if you have never been overdrawn, opting for the protection is just as smart as having any type of insurance even though you have never had a misfortune. 


After August 15th, we cannot….BY LAW….. continue to cover and/or approve any debit card or ATM transaction that is not supported by sufficient funds if the customer has not given us permission to protect their best interests.  This is a valuable tool that CNB has offered for 10 plus years, but now only you can protect yourself by opting-in to have overdraft protection.  And, unlike home, auto, medical or other types of insurance policies, this one only costs you if you use it.