Debit, ATM overdraft rules are changing

Using your debit card to buy a $2 cup of coffee when there is $1 in your account could cost you an extra $30 in overdraft fees today.

After new rules on those fees take effect, that purchase could be denied instead, costing embarrassment but not money.

The Federal Reserve announced Thursday that beginning July 1, banks cannot charge overdraft fees for ATM and debit card transactions unless the customer opts in to an overdraft program.

The new rules do not affect overdraft procedures for checks or for recurring debit transactions, such as automatic bill payments.

In the Lynchburg area, First National Bank will have to change its overdraft program slightly, but Bank of the James and Select Bank will not have to change, officials said.

Altavista-based First National Bank charges a $30 fee when a check, ATM or debit card transaction drives an account into the red, said Rob Gilliam, president.

The bank lets customers opt out of that program, but most customers keep it.

“We’ve got a minimal number of depositors that have indicated their desire to opt out,” Gilliam said. “It seems like the consumers really like that service. If they need the money or if they’re making a purchase or if they’re writing a check, their preference is that they’d like it to get paid.”

To comply with the Fed’s new regulation, having no overdraft protection would become the default. Customers would opt in, instead of opting out.

The bank has “seven months to provide customers the opportunity to opt in,” Gilliam said. “We haven’t figured out exactly how we’re going to do that yet.”

Gilliam said that the new regulation would not create additional work for the bank other than setting up accounts to comply with customers’ choice on overdraft protection.

Bank of the James used to offer overdraft protection with a fee, but it canceled the service in 2007, said Todd Scruggs, vice president.

He said the service could create problems for customers who habitually used it. In that sense, it was similar to payday loan services, Scruggs said. “If you know that you have this line of credit there, you’re not really going to stop yourself from tapping it.”

Some people see the fees on overdraft services as being excessive, he said.

Select Bank, based in Forest, does not have an overdraft protection program that charges fees. It lets customers overdraw on their checking accounts only if they have enough money in another account to cover it, said Sherri Sackett, assistant vice president for marketing.

The Fed instituted the new overdraft rules based on consumer testing, according to a news release. Tests showed that consumers wanted to have to opt in before they could overdraw their accounts through ATMs or debit card purchases.

“At the same time, testing shows that most consumers want overdraft services to cover important bills, such as checks they use to pay rent, utilities, and telephone bills,” the news release said.