The Federal Reserve Board has announced final rules that prohibit financial institutions from charging consumers fees for paying overdrafts on automated teller machine (ATM) and one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft service for those types of transactions.

Before opting in, the consumer must be provided a notice that explains the financial institution's overdraft services, including the fees associated with the service, and the consumer's choices. The final rules, along with a model opt-in notice, are issued under Regulation E, which implements the Electronic Fund Transfer Act and are effective July 1, 2010. READ MORE

MasterCard Worldwide has announced that USAA Federal Savings Bank will implement its MasterCard Integrated Processing Solutions (IPS) debit processing platform for branded network and issuer processing services in support of signature and PIN debit, and ATM driving. READ MORE

Fiserv has announced that its ACCEL/Exchange Network will begin processing and offering secure Internet Personal Identification Number (PIN) debit transactions in November 2009, saying it will be the first PIN debit payments network to do so. The offering is the result of a partnership with Acculynk, provider of a software-only service that enables PIN debit payments online. READ MORE

Congressional proposals to rein in abusive overdraft practices are long overdue, Center for Responsible Lending executive Eric Halperin told the House Financial Services Committee today (full testimony). Halperin, who is director of CRL's Washington office, gave full support to legislation aimed at reforming bank overdraft programs, which cost consumers $23.7 billion last year and are among the most predatory lending products on the market.

"Charging people a $35 fee for a small, debit card transaction is unacceptable," said Halperin, director of CRL's Washington office. "It doesn't save them bounced check fees, it simply skims money from their account and puts them in a bind."

First Data has announced that its STAR Network is the first electronic funds transfer network to launch load and reload support for STAR-branded general purpose prepaid cards. Using patent pending technology, the STAR Network has completed the infrastructure to enable load and reload functionality at participating ATM and POS locations. The expanded transaction set includes activation, load/reload and split tender purchases – with PIN-security and the associated reduction in fraud built in. The new STAR RELOAD service icon denoting load/reload card capabilities will be displayed with the STAR brand on participating cards, merchant point-of-sale and ATM locations. READ MORE

In an article titled "Credit card giants create debit havoc", Dana Flavelle and Rita Trichur write for the Toronto Star about small merchant reactions to the introduction of Visa and MasterCard debit products into Canada.

RBS WorldPay has announced that National Payment Card Association (NPCA) debit cards can be processed by RBS WorldPay. According to RBS WorldPay, "NPCA offers merchants a card acceptance solution with significantly lower transaction fees than traditional credit or debit cards." READ MORE

MasterCard has announced that Fifth Third Bank is now issuing the World Debit MasterCard card - which MasterCard calls "the industry’s only premium debit card that provides U.S. consumers with access to enhanced rewards, unique offers and savings opportunities and greater purchase protection. By offering World Debit MasterCard to its customers, Fifth Third Bank is now providing a custom-tailored debit product that meets the unique, everyday spending needs of its high-spend and reward-seeking debit cardholders." READ MORE

Glenbrook's Jacqueline Chilton is attending this week's ATM, Debit & Prepaid Forum 2009 in Las Vegas. You can follow her reports from the conference over on our PaymentsViews.com sister site.

Tempo has introduced a new Web-based platform that it says "enables organizations to quickly and easily offer affinity and co-branded debit cards to customers, contributors and members. These organizations can now provide open loop debit cards and offer rewards ranging from cash-back to charitable contributions. The debit cards enabled by Tempo are issued by First Bank & Trust, of Brookings, SD, part of Fishback Financial Corporation. Tempo’s platform enables these cards to be linked to cardholders’ pre-existing checking accounts." READ MORE

Bank of America reported financial results this morning for the third quarter of 2009. In its Global Card Services unit, the bank reported card purchase volumes declined over 14% year over year from $63.3 billion to $53 billion. The charge-off rate doubled - from 6.4% to 12.9% compared to the same quarter last year. Debit card purchase volume grew slightly about 3% from $53.2 billion to $54.7 billion.

MasterCard Worldwide has announced the launch of MasterCard Money Manager™ - calling it "a new, interactive financial management tool that enables MasterCard cardholders to quickly and efficiently monitor debit card spending for themselves and members of their household. Using the web-based tool, consumers have the ability to review signature and PIN-based MasterCard transactions by merchant category, and create customized categories, making it easy to identify spending patterns and compare actual spend to an allocated budget." READ MORE

Visa Canada has published survey results finding that "Canadian consumers welcome more choice in the country's debit marketplace. The survey, commissioned by Visa Canada between June 26 and July 5, 2009, found that three out of four (74 per cent) respondents said they would be interested in a debit card that offers enhanced features and two out of three (66 per cent) believe that consumers should have more choice when it comes to direct debit payments in Canada." READ MORE

Last week, WAMU's DIane Rehm hosted a program focused on Consumer Credit Protections - including overdraft fees. Participants included Kathleen Day, Center for Responsible Lending, Diane Casey-Landry, Chief Operating Officer, American Bankers Association, and Nancy Trejos, Washington Post Personal Finance Writer. I was surprised at some of the lack of understanding about how debit cards actually work - as expressed by one participant in particular on this program!

First Data has announced an agreement with PayPal that allows debit cardholders in First Data’s STAR Network to quickly link their STAR debit card to a PayPal account online. First Data says its STAR Network is "the first electronic funds transfer network to offer this innovative service to its member financial institutions." READ MORE

In an article titled "For Gun-Shy Consumers, Debit Is Replacing Credit", Nancy Trejos writes for the Washington Post about how the recession has cooled consumers on credit cards while they are increasingly using their debit cards to make purchases.

A strongly worded New York Times editorial today titled "Bleeding Holders of Debit Cards Dry" notes that several banks last month announced changes to their overdraft policies - but says those changes aren't enough. Citing yesterday's report from the Center for Responsible Lending that estimated that "banks and credit unions raked in nearly $24 billion in overdraft income in 2008" and noting that "American families now spend more on overdraft fees every year than on books, breakfast cereal or fresh vegetables and only slightly less than they spend on major appliances," the editorial advocates stronger Congressional action.

In this evening's program, the NewsHour with Jim Lehrer featured a segment titled "Banks, Customers Face Changes to Debit Card Overdraft Fees". The NewsHour's Jeffrey Brown interviewed Ron Lieber from the New York Times - here's the transcript.

Wells Fargo this afternoon announced changes to its overdraft practices for Wells Fargo and Wachovia customers. In a press release, Wells Fargo said it will "eliminate overdraft fees for customers when they overdraw their accounts by $5 or less and will charge no more than four overdraft fees per day. In addition, Wells Fargo and Wachovia customers will be able to opt out of overdraft coverage, meaning customers can specify that they don’t want their transactions authorized into overdraft if funds aren’t available to cover the transaction." READ MORE

In an article titled "Chase and Bank of America Revise Fee Policies", Ron Lieber writes for the New York Times about announcements from Bank of America and Chase regarding changes both banks are planning to their overdraft fee policies.

In a press release, Bank of America announced changes to be implemented October 19 including not charging overdraft fees when a customer's account is overdrawn by a total amount less than $10 for one day, not charging overdraft fees on more than four items per day and making it easier to opt out of overdrafts altogether. Next June, the bank plans additional changes including providing customers a choice with respect to opting in or out of overdraft capability.

According to Lieber's reporting, Chase is planning changes in the first quarter including not charging a fee when the overdraft is for less than $5 and not sorting items in descending amounts prior to posting - a technique that maximizes the overdraft fees charged and has drawn criticism from consumer groups. Chase also plans to allow its customers to opt out of overdraft coverage.

The Reserve Bank of Australia has announced that it is "is considering changes to the regulation of interchange fees in the EFTPOS system. The proposed change to EFTPOS interchange regulation is intended to ensure that competition between EFTPOS and scheme debit is conducted on a level playing field. The change does not imply that interchange fees in the different systems should be equal, only that they are subject to equivalent regulation."

Over on his Payment Systems blog, Andy Orrock, COO at On-Line Strategies, shares some insights into transaction times for various payment card transaction times from a large merchant.

I found the time difference between credit and offline debit cards vs. online PIN-based debit cards to be interesting with PIN debit taking 1.6 times longer. Andy shares his explanation of the timing difference in the comments.

In an article titled "Democrats Target Bank Overdraft Charges", Binyamin Appelbaum and Nancy Trejos write for the Washington Post about how a backlash against the banks continues with congressional Democrats planning a "crackdown on overdraft fees" - most of which are associated with debit card transactions.

PULSE, the Discover Financial Services business unit responsible for expanding global cash access for the company, has signed a long-term ATM acquiring agreement with TRIONIS, a European interbank processing network. TRIONIS is jointly owned by retail banks from nine European countries, the European Savings Banks Group, and First Data. READ MORE

In an article titled "Overspending on Debit Cards Is a Boon for Banks" in today's New York Times, Ron Lieber and Andrew Martin write about the fees banks charge on debit card overdrafts - reporting that "this year alone, banks are expected to bring in $27 billion by covering overdrafts on checking accounts, typically on debit card purchases or checks that exceed a customer’s balance."

Speaking of debit cards, here's a blog post on the Consumer Reports blog about the hassles of using a check. You remember them, right?

Paul Tomasofsky writes this morning about our "Note on Check Cards" post late yesterday:

Today I noticed your short sardonic statement about Check Cards and Debit Cards. You make a great point that it seems the name is starting to shift around.

However, I must make a correction. The early days of Visa Check Cards were actually the early 1980’s and not the 1990’s.

I was a witness to these early days. In fact, in the spring of 1982 I served on a VISA Advisory Panel that actually met in Florida to discuss what to name this new product. We studied lots of VISA consumer research that showed how much consumers back then really hated the word “debit.” In the end, “Check Card” became the name.

In addition, in the fall of 1982, I led the team at the then First National Bank of Maryland that issued 150,000 VISA Check Cards to our DDA base."

Back in the early days of debit cards in the early 1990's, Visa pioneered the term Check Card for its debit card product.

More recently, it's been emphasizing Visa Debit as the product's name - transitioning away from the original Check Card branding.

Ironically, today's Wall St. Journal had a headline that read "Wal-Mart to Pay Via Check Cards". No, not via Visa Check Cards - but, rather, MasterCard Debit Cards.

Metavante has announced that Danversbank has deployed its expanded rewards and loyalty product to offer Danversbank's clients a blended rewards program that combines issuer- and merchant-funded rewards. "Through its deployment of Points2U Plus, Danversbank now awards cardholders with bonus points for debit card-based transactions made at participating retailers — this is in addition to the points a cardholder already earns by using their Dansverbank-issued debit card. The bank is also leveraging Points2U Plus to award double points for card use during seasonal promotions, as well as to reward cardholders with additional loyalty points for the use of other Danversbank services." READ MORE

The New York Times today has an editorial titled "Debit Card Trap" on the subject of the overdraft fees that many banks collect on debit card transactions when there aren't sufficient funds in the consumer's checking account. The Times cites research by Moebs Services finding that banks in the US "will earn more than $38 billion this year from overdraft and bounced-check fees. Moebs also estimates that 90 percent of that amount will be paid by the poorest 10 percent of the customer base."

The Times is urging that regulators adopt new rules - currently under consideration by the Fed - that would require consumer opt-in and would require notification in real-time when a debit card charge is going to result in an overdraft fee being charged.