CFPB Circular on Documenting Overdraft Opt-Ins

The CFPB’s recently issued Consumer Financial Protection Circular 2024-05 calls attention to how the Bureau believes banks and credit unions should document a consumer’s opt-in to overdraft services under the Electronic Fund Transfer Act (EFTA) and Regulation E.

While the Circular does not provide many details of the circumstances that led to its issuance, the CFPB appears to be focused on two potentially-overlapping scenarios that it indicates have come up in examinations:  1) when an institution is not able to produce a copy of the specific type of direct evidence of opt-in that the Bureau is looking for, possibly due to the passage of time since the opt-in; and 2) where an institution relies on a business record providing indirect evidence of the opt-in (rather than a signed opt-in form itself), which presumes that certain procedures were followed, but is not able to demonstrate to the Bureau’s satisfaction that such procedures were in fact followed consistently over the time period in question.

The CFPB lists the following as examples of records that would provide appropriate evidence of the consumer’s opt-in to overdraft services:

• If the consumer opted-in in person or through the mail, a signed or initialed consent form;
• If the consumer opted-in over the phone, a recording of that phone call; and
• If the consumer opted-in online, a securely stored electronic signature with the date.

The Bureau does not state that these specific types of records are the only acceptable records, and the discussion in the Circular suggests that they are not necessarily the only acceptable records. 

Since a significant time can pass between a consumer opting-in to overdraft coverage and a particular overdraft fee being assessed, depository institutions should consider reviewing how their document retention periods apply in this context, and what evidence they would be able to produce in a regulatory examination regarding opt-ins that occurred at various time periods, potentially including evidence regarding the processes that support the validity of such evidence.