RSK.IQ Question of the Week 1/22/18

Regulation E and Opting-In to Overdraft Program by Telephone


The Bank wants to accept affirmative consent from a consumer for its overdraft protection program via telephone.  Regulation E states “The institution must provide a readily-available telephone line that consumers may call to provide affirmative consent”.  Is it sufficient for a customer to call the branch and/or the Deposit Operations Department and simply say they want to opt in?  If so, how does the Bank retain evidence of compliance under Regulation E?

Response Summary

A local or toll-free telephone number providing service during normal business hours in the Bank’s normal business area will satisfy the requirement for a readily available telephone line. Regulation E does not specify what will be considered evidence of the consumer’s telephoned consent. Presumably an internal record maintained by the Bank will be sufficient. The Bank will be required, however, to provide a written confirmation to the consumer of the consumer’s consent, so this will be in the nature of documentary evidence.

Response Detail

Regulation E requires a financial institution to provide a reasonable opportunity for a consumer to indicate their affirmative consent, or opt-in, to the institution’s overdraft protection program for ATM and one-time debit card transactions. The official commentary states that a reasonable opportunity to opt-in includes a “readily available telephone line” that consumers can use to call in to the institution. 12 CFR §1005.17(b)(1)(ii); Official Interpretations, 1005.17(b) – 4.ii.

This section does not define what a “readily available telephone line” is. Regulation E, however, also requires a financial institution to provide a “readily available telephone line” allowing a consumer to determine whether a preauthorized transfer to a consumer’s account has taken place. In that case, the official commentary provides as follows:

To satisfy the readily-available standard, the financial institution must provide enough telephone lines so that consumers get a reasonably prompt response. The institution need only provide telephone service during normal business hours. Within its primary service area, an institution must provide a local or toll-free telephone number. It need not provide a toll-free number or accept collect long-distance calls from outside the area where it normally conducts business. Official Interpretations, 1005.10(a)(1) – 7.

If the branch or Deposit Operations telephone numbers satisfy the requirement of a local or toll-free telephone number that provides service during normal business hours in the area where it normally conducts business, then it satisfies the requirement.

Regulation E does not address how affirmative consent provided by telephone will be documented. Presumably, an internal record retained by the financial institution would be sufficient. The opt-in requirements of the regulation, however, do require two writings:

  • Notice to the consumer describing the overdraft service
  • Confirmation of the consumer’s consent. 12 CFR §1005.17(b)(i),(iv).

A financial institution may comply with the requirement to provide confirmation of the consumer’s affirmative consent by:

  • Mailing or delivering to the consumer a copy of the consumer’s completed opt-in notice
  • Mailing or delivering a letter or notice to the consumer acknowledging that the consumer has elected to opt into the institution’s service

The confirmation, which must be provided in writing, or electronically if the consumer agrees, must include a statement informing the consumer of the right to revoke the opt-in at any time. Official Interpretations, 1005.17(b) – 7.

In providing the written confirmation of the consumer’s telephoned consent, the Bank will have satisfied the regulatory requirement and provided documentary evidence of the consent in addition to its internal records.

This entry was posted on Monday, January 22nd, 2018 at 6:37 am.

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