What must a financial institution provide before a consumer signs up for overdraft protection?

Before a consumer can sign up for overdraft protection, the financial institution is required to provide an opt-in notice. This notice informs consumers that they have the option to choose whether or not they want to have overdraft coverage applied to their transactions, particularly for debit card and ATM transactions that exceed their account balance.

The opt-in notice must clearly explain the institution's overdraft policies, including the fees that may apply if the consumer opts in. This requirement is part of the regulatory framework established by the Electronic Fund Transfer Act (EFTA) and implemented through Regulation E, which is designed to protect consumers by ensuring that they have a clear understanding of their rights and the potential costs associated with overdraft services.

While a list of covered transactions, a copy of Regulation E, or last month’s bank statement may provide useful information, they do not fulfill the specific regulatory requirement for consumers to opt into overdraft protection. The focus on providing an opt-in notice ensures that consumers give informed consent before incurring any potential fees.