DOEREN MAYHEW would present the credit terms for above breakeven overdraft credit in the same form creditors present the terms of other products . Applying Regulation Z would :
• Prohibit large financial institutions from immediately taking funds from any incoming deposit in repayment of the consumer ’ s overdraft balance .
• Require large financial institutions to establish due dates on the same day of each billing cycle .
• Require large financial institutions to assess the consumer ’ s ability to pay for such credit .
Covered overdraft credit accounts would also be subject to Regulation Z account opening disclosures , and if a credit card is involved , fee limitations .
Above breakeven overdraft credits is when a charge or combination of charges for such credit exceeds the greater of ( 1 ) the pro rata share of the very large financial institution ’ s annual total direct costs and charge off losses for providing non-covered overdraft credit , or ( 2 ) an estimate published by the CFPB . Should a very large institution determine not to , or prefer not to , calculate its average costs and chargeoff losses for providing non-covered overdraft credit using the breakeven standard , the proposal would permit them to determine whether it is offering above breakeven overdraft credit based solely on the benchmark fee . The CFPB is considering four alternatives for this benchmark fee —$ 3 , $ 6 , $ 7 and $ 14 .
Regulation E Compulsory Use Prohibition
The proposal stipulates a large financial institution providing covered overdraft credit to a consumer could not condition the extension of such credit on the consumer ’ s agreement to repay it solely by preauthorized electronic fund transfer ( EFT ). Consequently , a large institution providing covered overdraft credit to a consumer must offer them at least one alternative repayment option in addition to a preauthorized EFT . Noncovered overdraft credit obtaining repayment through offset is not subject to the compulsory-use prohibition . Therefore , a large institution providing non-covered overdraft at or below breakeven pricing may continue to take repayment of a consumer ’ s overdraft balance immediately upon the institution ’ s receipt of the next deposit to the consumer ’ s account , just as institutions typically currently do .
Effective Date
The CFPB has an expected date for compliance of Oct . 1 , 2025 . The agency will monitor the impact of the rule after it goes final , and then decide whether to apply it , or something similar , to all financial institutions .
CARD Act Applicability
The proposal subjects all covered overdraft credits to the CARD Act provisions of Regulation Z if that credit is :
01
Open-end credit
02 03
Accessible by a credit card
Offered by a very large financial institution
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