EASTERN BANK
August 23, 2004
Mr. Robert Feldman, Executive Secretary
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, DC 20429
Attention: Comments
Re: Interagency Guidance on Over-Draft Protection Programs
Dear Mr. Feldman:
Eastern Bank is a mutually owned commercial bank based in Boston,
Massachusetts with over 150,000 consumer households in its customer
base. We appreciate the opportunity to comment on the proposed
interagency guidance on over-draft protection programs. We agree with
many of the conclusions which resulted from the agency's review.
Furthermore, we certainly agree
that consumer education is a critical component in the operation of an
appropriate overdraft protection program. However, several proposed
requirements, we believe, warrant your reconsideration. Most
importantly, we believe several provisions, including changes to
Regulation DD, blur the distinction between over-draft protection
programs and over-draft lines of credit. We strongly urge that these
proposed regulations only apply to marketed bounced-check protection
programs for which a specific limit is disclosed:
The guidance defines all forms of over-draft protection as a credit
service. We disagree. An over-draft line of credit is a guarantee to pay
over-drafts up to a clearly defined limit and under certain defined
terms. On the other hand, an over-draft bounced-check protection program
is provided on a discretionary basis. By not making this distinction,
the proposal requires that all overdraft balances be reported as loans
for purposes of required quarterly financial reports, and that banks
should adopt policies and procedures to assess credit and other risks.
Equally problematic is the suggestion that available amounts of
bounced-check protection programs be reported as "unused commitments".
We strongly object to these requirements, which will add confusion for
both bankers and consumers.
Furthermore, the proposed requirement that over-draft balances be
charged off within 30 days is troubling. Most over-drafts are corrected
within 30-60 days. Allowing a minimum of 60 days will result in fewer
adverse consumer credit reports and higher rates of repayment along with
less regulatory burden.
We believe that banks should be allowed to design their policies to
meet the needs of their customers and the particular circumstances of
their institution. We also believe that institutions should clearly
explain the discretionary nature of these programs. Banks should be
required to simply disclose whether or not payment of any over-draft is
discretionary. We also believe it would be difficult, if not impossible,
to alert customers before a non-check transaction triggers fees.
However, we do agree that available balances at an ATM should not
include funds available through the bounced-check protection program.
Lastly, banks should have the discretion to assess customer use to
take appropriate action or suggest alternative products available.
Consumer education on how to avoid over-drafts should remain the primary
focus for all.
We appreciate this opportunity to comment on the proposed
regulations.
Very truly yours,
K. Mark Primeau
Executive Vice President
Eastern Bank
2 Adams Place
Quincy, MA 02169