If you have a checking account, by now you have received a request from Redstone Federal Credit Union (RFCU), Regions Bank or another regional bank or credit union to “opt-in” to standard overdraft protection.  As of July 1, 2010 all financial institutions must educate new members if they will be charged for an overdraft.  By opting in to overdraft protection, you are acknowledging that you are aware you will be charged overdraft fees.

The language opt in or opt out can be confusing, but simply put it’s “are you in or are you out”?  If you want the overdraft protection, you are in.  If you do not, you are out.  If you do not opt in your bank or credit union will not pay your overdraft items.  Overdraft items include checks, ATM withdrawal, or one-time debit card transactions.  It does not include recurring ACH payments such as phone bills and gym memberships.

RFCU, for example, currently offers this overdraft privilege protection service as a courtesy.  After Regulation E, they can no longer offer this service automatically because they are restricted by law.  You must now tell RFCU that you DO want to be covered (opt in) for the overdraft protection.  Lawmakers wanted to prevent unscrupulous banks from intentionally charging overdraft fees to the consumer, making those in dire straits fall on even tougher challenges.  Regulators also want the consumer to make an active, informed decision regarding the use of these services.  

Opting in is free and you are only charged an overdraft fee if you actually use the service.  Opting in doesn’t guarantee your overdrafts will be paid, either.  That is still done at the discretion of your financial institution.  

One alarming thing the legislation did not address is a limit on overdraft charges.  Banks can still charge as much as $39 per overdraft fee, according to a recent CFA report.  FDIC statistics show 14 percent of customers account for 93 percent of overdraft charges, and some postulate that all customers could be penalized for the changes by having to pay for formerly free services.

For existing members, the date your bank or credit union will begin adhering to the regulation may vary.  RFCU is August 1, while Regions Bank is August 13.  All existing members must opt in by August 15.  If you don’t opt in, you will be left out.