Linked Transaction Overdraft¶


Product ID	`PRD-019`
Launch tier	2
Jurisdiction	NZ + AU
Status	Planned
Regulations	CCCFA 2003 · NCC Act 2009 (NCCP) · NZ Banking Code · ABA Banking Code · ASIC RG 209

Overview¶

A pre-approved revolving credit limit attached to the customer's everyday transaction account (PRD-001). The overdraft is not a separate account — it is a credit facility linked to the existing transaction account. The customer draws on the overdraft whenever their account balance falls below zero, up to the approved limit. Interest accrues only on the drawn balance; when the balance is positive the facility is dormant.

The approved limit is set at credit assessment and is subject to annual review or review on customer request. The facility is regulated as a credit contract under the Credit Contracts and Consumer Finance Act 2003 (NZ) and the National Consumer Credit Protection Act 2009 (AU), and responsible lending obligations apply at origination, at limit increase, and at each annual review.

Key terms¶

Term	Detail
Product type	Revolving credit facility, linked to transaction account
Host account	PRD-001 Everyday Transaction Account
Approved limit range	$500–$10,000 NZD or AUD
Interest rate	Variable, per current pricing schedule
Interest accrual	Daily on drawn (negative) balance
Interest charging	Monthly; debited to account on last calendar day of month
Monthly facility fee	Per fee schedule; waived if account balance was never negative during the month
Minimum repayment	Interest only; no mandatory principal repayment schedule beyond interest
Establishment fee	None
Annual review fee	None
Term	Ongoing; annual review

System capabilities¶

The following capabilities are active from the moment the overdraft limit is applied to the account.

Available balance (MOD-003). The real-time balance engine tracks available balance as ledger_balance + undrawn_overdraft_limit. The customer sees a single "available" figure in the app that reflects both their credit balance and remaining overdraft headroom. When the account balance is positive the overdraft headroom is shown separately as a credit line.

Account state (MOD-007). The account state machine supports an overdraft_active sub-state on the transaction account. The account enters this state when the ledger balance goes negative and the overdraft facility is active. The state is exited when the balance returns to zero or above. A separate unarranged_overdraft state covers the edge case where no facility exists but the balance goes negative.

Limit and interest management (MOD-117). The overdraft management engine maintains the approved limit, tracks drawn balance, calculates daily interest on any negative balance, charges monthly interest, monitors for hardship indicators, and enforces payment declines at the limit boundary. MOD-117 is the authoritative record of the facility terms and its event log.

Payment enforcement (MOD-021). The payment limit and velocity controller enforces that outgoing payments cannot exceed available balance (ledger balance plus overdraft limit). A payment instruction that would take the account beyond the limit is declined before execution. No partial payment is issued.

Daily interest accrual (MOD-005). The daily accrual calculator runs at end of day. If the ledger balance is negative, interest is accrued using the formula daily_interest = |negative_balance| × (annual_rate / 365). Accruals accumulate through the month and are posted as a single monthly charge.

Customer notifications (MOD-063). Notification orchestration dispatches: - An informational notification the first time the customer draws on the overdraft in a calendar month. - A utilisation alert when 80% of the approved limit is drawn. - An immediate notification if an unarranged overdraft is detected (balance goes negative with no active facility). - A hardship-related alert to the customer and back-office team when persistent overdraft use is detected (see section 10).

Eligibility¶

MOD-105 assesses eligibility against the following criteria at origination:

Existing PRD-001 account holder with a minimum of three months account history.
Satisfactory credit assessment result from MOD-028 (no active defaults on the credit register at the time of assessment).
No active hardship arrangement on the linked account.
NZ or AU residency confirmed.
Minimum income threshold met per current credit policy (CRE-002).
No unsatisfied court judgements or recent insolvency events on record.

Annual review. MOD-117 flags the facility for review on the anniversary of activation. MOD-028 is re-run. If the customer no longer meets eligibility, the limit is reduced to nil with 30 days written notice. The account continues as a standard transaction account. Partial limit reductions follow the same notice requirement.

Account opening¶

The origination flow for a new overdraft facility follows these steps:

Customer requests overdraft via app, or a pre-approval offer is surfaced by MOD-108 (product offer engine) based on account tenure and credit indicators.
Affordability assessment via MOD-027 (affordability calculator) — income verification, committed expenditure review, credit score via MOD-028.
Limit determination based on assessment output and credit policy parameters (CRE-002).
Conditional offer presented in app, including proposed limit, interest rate, and fee schedule.
Customer accepts the offer. MOD-050 (disclosure engine) delivers the initial credit disclosure required under CCCFA and NCCP before activation.
Limit is applied to the account immediately on acceptance. MOD-117 creates the facility record. MOD-007 enables the overdraft_active state on the account.

The end-to-end origination flow is designed to complete within a single app session for eligible customers.

Fee structure¶

Fee	Amount	Conditions
Monthly facility fee	Per fee schedule	Waived if account balance was positive throughout the entire month
Overdraft interest rate	Variable, per pricing schedule	Applied daily on drawn balance
Establishment fee	Nil	—
Annual review fee	Nil	—
Unarranged overdraft fee	Per fee schedule (MOD-110)	Applies only where no active facility exists and balance goes negative

Fees are tenant-configurable via MOD-110. The facility fee waiver logic is enforced by MOD-117: if no day in the calendar month recorded a negative balance, the fee debit is suppressed and a waiver event is logged.

Interest calculation¶

Interest accrues daily on the negative (drawn) balance and is charged monthly as a single debit entry.

Daily accrual formula:

daily_interest = |negative_balance| × (annual_rate_pct / 100 / 365)

MOD-005 runs the accrual job at end of each business day. MOD-117 stores each daily accrual record with posted = false. On the last calendar day of each month, MOD-117 sums all unposted accruals for the facility and posts a single interest charge debit via MOD-001 (double-entry posting engine). All accrual records for the month are then marked posted = true. A bank.credit.overdraft_interest_charged event is emitted.

If the account is closed part-way through a month, the outstanding accrual balance is charged as a final closing debit before closure is completed.

Statements¶

Monthly statements (MOD-113) include:

Overdraft interest charged during the month.
Monthly facility fee charged or fee waiver notation.
Average drawn balance for the month.
Current approved limit and remaining headroom at statement date.
Number of days at or above 80% utilisation.

An annual interest summary is produced for tax purposes, showing total overdraft interest charged in the financial year. Statements are delivered via the channel preference set on the account (app, email, or paper per MOD-059).

Closing¶

Closure may be initiated by the customer (via app or back-office request) or by the bank (on credit review failure, hardship resolution, or account closure).

Steps on closure request:

MOD-117 sets the facility limit to zero immediately, preventing further draws.
If the account balance is zero or positive: facility is closed. No further interest or fees accrue.
If a drawn balance exists: the customer must either repay the balance in full before closure is confirmed, or accept a balance transfer to a personal loan product (MOD-065 coordinates the transfer). The account continues as a standard transaction account during the repayment or transfer period.
Final interest charge is calculated and posted for any partial month.
MOD-007 removes the overdraft_active capability from the account state machine.
Closure confirmation is delivered via MOD-063.

Annual review failure follows the same closure path, with the addition of a 30-day notice period before the limit is reduced to nil.

Regulatory compliance¶

NZ — Credit Contracts and Consumer Finance Act 2003 (CCCFA). The overdraft is a continuing credit contract. Obligations include: responsible lending assessment before granting or increasing any limit (MOD-027, MOD-028, CRE-002); initial disclosure before activation (MOD-050); variation disclosure on any limit change; ongoing obligation to assess hardship if customer signals financial difficulty. Annual review obligation is set by credit policy (CRE-003).

AU — National Consumer Credit Protection Act 2009 (NCCP). Equivalent obligations to CCCFA: responsible lending assessment, credit guide and initial disclosure, variation disclosure, and hardship provisions. MOD-050 handles jurisdiction-appropriate disclosure documents.

NZ and AU Banking Codes. Both codes require prompt notification when a customer enters an unarranged overdraft. MOD-063 dispatches this notification in real time.

AU ASIC RG 209. Responsible lending guidance for credit assessments. MOD-027 and MOD-028 outputs are logged and retained to demonstrate compliance with the reasonable enquiries and verification standards.

Financial hardship monitoring. If a customer has a continuously negative balance for more than 60 consecutive days, MOD-117 emits a hardship flag. MOD-007 sets the hardship state on the account. MOD-063 alerts the back-office team to initiate a proactive hardship conversation per CON-008. This mechanism also satisfies the indicator monitoring obligation in CRE-007. Customers in hardship arrangements are excluded from limit increase assessments until the arrangement is resolved.

Governing policies¶

CRE-001 — Credit Risk Management Policy
CRE-002 — Responsible Lending Policy
CRE-003 — Credit Decisioning & Scorecard Policy
CON-001 — Customer Fairness & Conduct Policy
CON-004 — Product Disclosure & Sales Practice Policy
CON-005 — Fee & Pricing Transparency Policy
CON-008 — Financial Hardship Policy
PAY-001 — Payment Operations Policy
AML-002 — Customer Due Diligence (CDD) Policy

Implementation modules¶

Module	Name	Status
MOD-001	Double-entry posting engine	Deployed
MOD-003	Real-time balance engine	Deployed
MOD-005	Daily accrual calculator	Deployed
MOD-007	Account state machine	Deployed
MOD-027	Affordability calculator	Deployed
MOD-028	Credit score & risk rating	Deployed
MOD-050	Disclosure enforcement module	Deployed
MOD-059	Credit bureau submission engine	Deployed
MOD-063	Notification orchestration	Deployed
MOD-065	Credit servicing & collections	Deployed
MOD-110	Fee engine	Deployed
MOD-112	Amortisation schedule engine	Deployed
MOD-113	Statement generation	Not started
MOD-117	Overdraft management engine	Deployed

Compiled 2026-05-22 from source/entities/products/PRD-019.yaml