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FDIC Federal Register Citations

Peoples State Bank


From: John J Blake III [mailto:jjblake@peoplesstate.com]
Sent: Tuesday, July 13, 2004 8:25 AM
To: Comments
Cc: Angela B Rivers
Subject: Joint Agency Notice - Overdraft Protection Programs

I am submitting comments on behalf of Peoples State Bank located in Many, Louisiana, FDIC #8801. We are a $283 million bank with offices in five parishes in Louisiana. We began offering "Bounce Protection" in 1999 and our customers appreciate the overdraft privilege that this program provides. We feel it's important to take this opportunity to express our concerns regarding the proposed guidance.

1. Best Practice of Charging-Off Overdrafts within 30 days: We feel the 30-day time limit would not be beneficial to our customers who use "Bounce Protection". Currently, if our customer, with "Bounce", does not make deposits to cover their overdrafts after 70 days, our software will automatically charge-off the account. During the 70 days, we are working with the customer to determine if they will be able to cover the overdrafts, and if not, we provide options like our repayment program. Therefore we feel it would be more beneficial to our customers to keep the 70-day time limit because our customers are accustomed to this practice. A notice is mailed to our customer from our bank each time their account is overdrawn so the customer is aware of their overdraft status. A series of letters are also mailed. If the overdrafts are not paid within 30 days, the account is suspended. If the customer chooses to enter our repayment program, he/she will be allowed to pay back the amount they are overdrawn within a twelve- month period, without paying any interest or additional fees. In most cases, we will restore their "Bounce Protection" upon receipt of the full amount owed. Allowing a 70-day time limit will provide more flexibility to banks. This flexibility will be greatly appreciated by customers who do not receive paychecks on a weekly or bi-weekly basis. Charging-off the account after 30 days will only hurt the customer, not the bank. Most banks report account charge offs monthly to companies like "TeleCheck" and "Chex Systems". We feel the 30-day time limit will create problems for many customers who are able to cover their overdrafts and avoid negative reporting on their check writing history if more than 30 days is provided to them.

2. Safety & Soundness Issue of Reporting "Unused Commitments": We believe this would be costly because of additional software that would be required to monitor "unused commitments" on "Bounce Protection". In addition to "Bounce", we offer the traditional "Overdraft Protection," which is a line of credit to cover overdrafts and we do not report "unused commitments" on this service. We feel this requirement would be a tremendous burden to banks.

3. Marketing and Communications Proposal Regarding Opt Outs: Our customers may request that "Bounce Protection" be removed from their accounts at any time. The only time a customer will be charged is if he/she goes into the overdraft privilege limit provided with their particular account type. The customer is in total control of using or not using this privilege. When customers overdraw their accounts, we charge a standard fee for every item that exceeds their balance. The benefit to our customers who have "Bounce Protection" is that we will pay their checks or allow POS transactions when the total amount is within their allowed limits. This saves our customer the additional charges that would be incurred by the merchants who receive these checks. The customer is free to avoid any insufficient funds charges by simply not making withdrawals that exceed their available balance. Providing an "opt out" would be labor intensive and time consuming which would not be beneficial to banks. We urge you reconsider the "opt out" requirement.

4. Marketing and Communications In Regards to Alerting Consumers Before Non-Check Transactions Trigger Any Fees: This would require an expensive software upgrade that would not be cost effective. If our customers have the ability to access their "Bounce Protection" limit by writing a check but not by POS or ATM, this would require our bank to keep two sets of records for each customer who has "Bounce Protection". This requirement would be very time-consuming for banks and will cause great confusion among our customers. With Check 21 on the horizon, we feel it will be even more beneficial for customers to have some form of "overdraft protection" for all of their transactions.

Thank you for the opportunity to express our concerns.

John J. Blake III
President & CEO

 

Last Updated 07/13/2004 regs@fdic.gov

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