STRUNK & ASSOCIATES,
L.P.
June 23, 2004
Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, D.C. 20429
Re: Proposed Interagency Guidance
on Overdraft Protection Programs
Dear Mr. Feldman:
We appreciate the opportunity to comment on the proposed Interagency
Guidance on Overdraft Protection Programs1 issued by the
member agencies of the Federal Depository Institutions Examination
Council (“Agencies”).
For over 10 years, Strunk & Associates has consulted with banks,
thrifts and credit unions throughout the country in connection with
Strunk’s
Overdraft Privilegesm Program.
Our comments on the Proposal are set forth below and are identified
by the title of the section of the Proposal
to which they relate.
REQUEST FOR COMMENT
Interagency Guidance on Overdraft Protection Programs / Introduction
The Proposal states that “[t]his credit service is sometimes
offered to transaction account consumers, including small businesses,
as an alternative
to traditional ways of covering overdrafts."2 We
believe that it is safe to say that all depository institutions have
provisions in
their transaction account agreements that provide that the depository
institutions
may, in their sole discretion, pay or return a check or other item
that is presented against insufficient funds. We also believe that
it is safe
to say that all depository institutions engage in the payment of discretionary
overdrafts employing the same process that has always been utilized
by depository institutions, i.e., reviewing account statistics to determine
whether to pay or return an item that is presented for payment against
insufficient funds. It is important, therefore, that the Agencies recognize
that there is likely not a single depository institution in this country
that does not have the option to pay an item presented against insufficient
funds and, therefore, that does not offer an “overdraft protection
program” to its customers. Because of the difficulty in distinguishing
between “overdraft protection programs” and the “traditional,
ad hoc, discretionary payment of overdrafts,"3 it
must be recognized that the final guidance adopted by the Agencies
will apply not only
to a subset of depository institutions that may have entered into contracts
with overdraft protection service vendors, but it will likely apply
to
all of the approximately 20,000 depository institutions in the country.
The Proposal states that, “[w]hile the specific details of overdraft
protection programs vary from institution to institution, and also
vary over time, those currently offered by institutions incorporate
some or
all of the following characteristics: . . "4 The
only characteristic in the ensuing list, however, that distinguishes
so-called “overdraft
protection programs” from the traditional discretionary payment
of overdrafts is the first characteristic, which has to do with the
promotion of the service. We are not certain that a distinction can
be made between “disclosure” and “promotion” that
is clear enough upon which to base comprehensible guidance. For example,
under recent guidance issued by the State of Washington, institutions
are encouraged to provide “complete disclosure of all terms of
Overdraft Protection at account set up or when the customer meets ‘automatic
eligibility’ requirements.” 5 The
Washington Guidance indicates that such disclosures should include,
among other things, the overdraft
limits and the discretionary nature of the institution’s decision
to honor an overdraft. Moreover, the Washington Guidance suggests that
a “best practice” is to describe the overdraft service
in a brochure, separate and apart from the terms and conditions of
the transaction
account.6 It
could be argued that a depository institution that complies with the
Washington Guidance is “promoting” its discretionary
overdraft protection service. It is important that the Agencies distinguish
between necessary and appropriate disclosure, some of which may be
made in accordance with guidance issued by state regulators, and the “marketing” or “promotion” of
overdraft services.
The Proposal also states that, “[u]nlike the discretionary accommodation
traditionally provided to those lacking a line of credit or other type
of overdraft service (e.g., linked accounts),7 these
overdraft protection programs are marketed to consumers essentially
as short-term credit facilities,
and typically provide consumers with an express overdraft ‘limit’ that
applies to their accounts.” 8 The
characterization of the disclosure of the parameters of overdraft protection
services as the marketing
of “short-term
credit facilities” on the basis of the promotion of the service
alone is a mischaracterization of discretionary overdraft services.
Such services, whether promoted or not, are not, by any stretch of
the imagination, “credit
facilities.” While depository institutions that promote their
overdraft protection service may disclose the limit of the service,9 the
disclosure of that information does not convert a discretionary service
to a contractual
commitment to pay overdrafts in the future.
We are aware that some depository institutions make a commitment to
pay overdrafts in connection with their offer of overdraft protection
services.
The characterization of such services as credit facilities is, of course,
appropriate in that instance. The mere disclosure of the dollar limit
applicable to overdrafts on a transaction account, however, is not
determinative of whether the depository institution has made a commitment
to extend
credit in the future; and, it is precisely that commitment to extend
credit in the future that is the defining feature of a “credit
facility.” We think that it is inappropriate to characterize overdraft
protection services as “short-term credit facilities” if,
in fact, the discretion to pay or not to pay an item is retained by the
depository institution. The fact that a depository institution simply
discloses more information regarding its overdraft decision-making process
than it has disclosed previously does not alter the fact that the depository
institution has no contractual obligation to pay any item that would
overdraw an account. Even with the disclosure of additional details,
the institution is under no obligation to pay an item and create an overdraft.
Characterization of the service as a “credit facility” implies
that there is a funding commitment, which is clearly not the case with
discretionary overdraft services. There is simply an accommodation
extended on a discretionary basis, with no obligation to do so in the
future,
even where an accommodation has been made in the past.
It appears that the characterization of the discretionary payment of
overdrafts as a “short-term credit facility” is designed
to justify treatment of the available limits as “unused commitments” subject
to capital requirements, which presumably will dissuade depository
institutions from disclosing the dollar limitations in the future.10 We
find it anomalous that the Agencies would discourage depository institutions
from disclosing
the dollar limitations of overdraft services when one of the stated
objectives of the Proposal is to encourage “[c]lear disclosures
and explanations to consumers about the operation, costs, and limitations
of overdraft
protection services [to] promote consumer understanding, limit complaints,
and encourage appropriate consumer use.” 11 This
is particularly true in light of the fact that the disclosure of such
limits is encouraged
by state guidance such as the Washington Guidance and Pennsylvania
Guidance
as discussed above.
We urge the Agencies to avoid any characterization of overdraft protection
services as “short-term credit facilities,” since we believe
that it is unsupportable in light of the discretionary nature of the
service. We believe that, to the extent the Agencies are concerned
about the effects of the promotion of such services by the disclosure
of the
available limits, there are adequate alternative remedies available
in the event that the manner in which such limits are disclosed is
misleading.
The Proposal states that, “[r]egardless of whether the overdraft
is paid, institutions typically have imposed a fee when an overdraft
occurs, often referred to as a nonsufficient funds or ‘NSF’ fee.” 12
Fees
imposed when an overdraft occurs are generally referred to as “overdraft
fees,” not “NSF” fees, which are imposed when an
item is returned to the payee for nonsufficient funds.
Concerns
The Proposal again characterizes overdraft protection services as “intended
essentially as short-term credit facilities.” 13 We
would submit that the Agencies need not mischaracterize discretionary
overdraft services
as short-term credit facilities to address the concerns outlined in
the Proposal. If indeed institutions do not clearly disclose the nature
of
the overdraft protection services they offer, the Agencies and consumers
have adequate remedies under existing law to address any misleading
or deceptive practices. We share the commitment of the Agencies to
the promotion
of accurate disclosure and feel that transparency is integral to public
confidence in the overdraft protection services provided by all depository
institutions; however, we see no point, other than attempting to establish
a basis for imposing capital requirements, for the characterization
of these services as “short-term credit facilities” if
there is no contractual obligation on the part of the depository institution
to pay the overdraft.
Safety & Soundness Considerations
We believe that the 30-day time frame for charge off of an overdraft
is too short. It has been the experience of our customers that 90%
consumers will,
within a 45- to 60-day time period, deposit sufficient funds in their transaction
account to clear any overdraft created. We believe that charge off of an
overdraft balance within 30 days from the date first overdrawn is a “one-size-fits-all” approach.
In many cases, if not most, such an approach is premature and results in
unnecessary expense to both the depository institution and the consumer.
Once a transaction
account is charged off, the account number is often removed from the system
of the depository institution. If the customer pays the overdraft amount
and wishes to reactivate the transaction account, new account documentation
usually
must be executed, a new account number must be assigned and new checks must
be printed for the new account.
In addition to the added costs associated with opening a new account, many
institutions report the charge off of a transaction account to credit bureaus.
In light of the fact that a large percentage of overdrafts will be paid in
full by consumers within the 45- to 60-day period, the premature charge off
of an overdraft would be detrimental to the credit history of many consumers.
The “Best Practices” suggested by the Agencies urge that depository
institutions not report negative information to consumer reporting agencies
when overdrafts are paid under the terms of the transaction account
agreement.
14 Premature
charge off of an overdraft results in many cases in the truthful, but largely
unnecessary, reporting of negative information to consumer reporting
agencies.
It has also been the experience of our customers that charging off an overdraft
reduces the chances of collection of the overdraft dramatically. Our customers
report that their success rate in the collection of overdrafts has gone from
20%, where the overdraft is charged off within 30 days, to over 80%, where
the account is not charged off for an additional 15 to 30 days. That recovery
rate also applies where the overdraft is converted to a closed-end, interest-free,
loan in which the consumer is given an opportunity to pay the overdraft in
installments. By the addition of a very small increment of time, consumers
are provided a greater opportunity to avoid additional costs and negative
impact on their credit rating, and depository institutions dramatically increase
the
likelihood that they will recover on the overdrafts.
We also strongly disagree with reporting the available amount of overdraft
protection as an “unused commitment.” “Commitment” is
defined as “an agreement or pledge to do something in the future; specif:
an engagement to assume a financial obligation at a future date.” 15 Discretionary
overdraft protection services do not involve agreements or engagements to
pay overdrafts at a future date. They are discretionary services, accommodations
to consumers, that are exercised at the sole option of the depository institution.
While some institutions may “routinely communicate the available amount
of overdraft protection to depositors,” the promotional materials that
communicate that information generally make clear that payment of any overdraft
is purely discretionary, that the depository institution will consider payment
of reasonable overdrafts only as long as the account is in good standing,
but that the depository institution has no obligation to pay any item, even
if
the account is in good standing and even if overdrafts have been paid in
the past. It could not be more clear that there is no obligation on the depository
institution’s part to pay items that create an overdraft on the customer’s
account.
Thus, while the promotional materials provide more detailed information relating
to the criteria considered by a depository institution before paying an overdraft,
and may even include the available amount of overdraft protection, the disclosure
of that information does not constitute a written agreement to pay overdraft
items in the future. It is, rather, merely a restatement of the provisions
of the agreement governing the maintenance of the transaction account and
the disclosure of the depository institution’s policies with respect
to the discretionary payment of overdraft items. We submit that the establishment
of a limit on the amount of an overdraft a depository institution is willing
to permit on a transaction account and the communication of that limit to
a
consumer is totally irrelevant to the question of whether the limit constitutes
an unused commitment that should be reported and subjected to capital standards.
Schedule RC-L for Derivatives and Off-Balance Sheet Items addresses the reporting
of “unused commitments” and states that unused commitments involve “commitments
to make or purchase extensions of credit in the from of loans or participations
in loans, lease financing receivables, or similar transactions.” 16 The
instructions to Schedule RC-L indicate that depository institutions are to
report the unused portions of commitments in the appropriate subitem. The
subitems are: revolving, open-end lines secured by 1-4 family residential
properties;
credit card lines; commercial real estate, construction and land development;
commitments to fund loans secured by real estate; commitments to fund loans
not secured by real estate; securities underwriting; and, other unused commitments.
The latter category includes commitments to extend credit through “overdraft
facilities.” The “overdraft facilities” referred to in
Schedule RC-L, however, are overdraft lines of credit in which a commitment
has been
made to advance funds from a line of credit to a related transaction account
to pay items that are presented against insufficient funds. Such overdraft “facilities” are
written agreements to pay overdrafts and constitute commitments to extend
credit in the future up to the credit limit established for the line of credit.
They
do not include the discretionary payment of overdrafts as an accommodation
to consumers.
If the Agencies assume that the automation of part or all of the discretionary
overdraft payment process divests the depository institution of its discretion
to pay or return the item and, therefore, results in a commitment to pay
the overdraft items, we respectfully disagree. Even though part or all of
the overdraft
payment process may be automated, the depository institution always retains
discretion to change any of the criteria it uses to make the determination
of whether to pay or reject an item or to raise or lower its risk tolerance
level in connection with the payment of overdraft items. Moreover, factors
unrelated to the criteria used to generate reports, recommendations for payment
or ultimate decisions may be relied upon by a depository institution to refuse
to pay an item. Depository institutions may receive information relating
to the financial condition of a customer from any number of sources, direct
or
anecdotal and, based on that information, decline to pay overdrafts on that
customer’s account. Moreover, all depository institutions retain the
capability to override the decision or recommendation resulting from an overdraft
payment system’s analysis and to return, rather than pay, items. In
addition, all depository institutions have processes for manual review of
items that
exceed a certain threshold amount and have the discretion to either pay or
return those items. Thus, all depository institutions retain the discretion
to alter the system criteria as a whole or alter the outcome of the application
of those criteria to a single item. The decision to pay or return an item
is, therefore, always at the sole option and discretion of the depository
institution,
in accordance with the terms of the transaction account agreement.
We believe that the Agencies can address the concerns regarding misleading
promotion of the overdraft protection services without mischaracterizing
the contractual obligations of depository institutions in the discretionary
payment
of overdrafts. As the Agencies point out under the “Legal Risks” section
of the Proposal, the Agencies have the authority to enforce Section 5 of
the Federal Trade Commission Act pursuant to their authority in section 8
of the
Federal Deposit Insurance Act. We suggest that the Agencies rely on that
authority to address perceived problems of unfair or deceptive practices,
rather than
forcing depository institutions to comply with reporting provisions that
are clearly inapplicable as a means to discourage disclosure of overdraft
limits.
Legal Risks
Electronic Fund Transfer Act
As the Proposal points out, depository institutions are currently required
by the Electronic Fund Transfer Act (“EFTA”) and Regulation E
to disclose fees imposed in connection with electronic fund transfers. We
suggest
that the paragraph be expanded to refer to preauthorized automatic debits
and telephone-initiated transfers as well.
BEST PRACTICES
Marketing and Communications with Customers
Fairly represent overdraft programs and alternatives. The Proposal
suggests that, when informing consumers about an overdraft protection
services,
depository institutions should also inform consumers generally of
other available overdraft services or credit products and explain
to the
consumers the costs and advantages of various alternatives to the
overdraft protection service. The Proposal could be read to assume
that discretionary
overdraft services are automatically disadvantageous for all consumers.
This approach ignores the fact that the costs and advantages of various
alternatives will depend upon patterns of use and the habits of consumers,
which are as varied as the consumers themselves. For example, a depository
institution may impose an annual or other periodic fees to participate
in the service and transfer or transaction fees in connection with
individual advances. If the consumer never utilized their overdraft
line of credit that imposes such fees, or used the credit line only
once in any given year, a discretionary overdraft service would be
more advantageous because the customer is charged a fee only if and
when an overdraft is paid. The point is that an advantage of one
service versus another is relative and completely dependent upon
the consumer’s
own particular pattern of use and habit. If other information should
be delivered with the information on the overdraft protection service,
we believe that it should be factual information and not conjecture.
Thus, if comparisons are suggested, a comparison of annual fees, per
transaction fees, periodic fees or periodic rates, payment amounts
and due dates, etc., would be much more useful to the consumer. Consumers
could determine, based on their own anticipated usage or experience,
which of the alternatives is most advantageous in their particular
circumstance. We do not believe that the Agencies should adopt the
Proposal as drafted based on the Agencies’ assumptions regarding
the relative merits, or demerits, of discretionary overdraft services.
Clearly explain discretionary nature of program. We agree that if
a depository institution promotes a discretionary overdraft protection
service, it
should not imply that the payment of items under the service is automatic.
We believe that many of the abuses that were identified when attention
was first focused on overdraft protection services have been “self-corrected” by
the industry. Nonetheless, depository institutions should be encouraged
to ensure that their advertising or other materials do not overstate
the obligation of the depository institution to pay overdrafts.
Most account agreements provide that the depository institution may,
in its discretion and at its sole option, pay or return a check or
other item presented for payment against insufficient funds. We believe
that
the final Interagency Guidance (“Guidance”) should stress
that, if the depository institution retains the discretion to pay or
not to pay overdrafts, consumers should be advised that they may not
rely on the fact that the depository institution will pay any item,
even if it has done so in the past. The Proposal suggests, however,
that a
depository institution “describe the circumstances in which the
depository institution would refuse to pay an overdraft or otherwise
suspend the overdraft protection program.” 17 This
implies that all of the circumstances in which the depository institution
would take those
actions should be described with particularity. If depository institutions
are required to be unnecessarily specific, the delineation gives rise
to the implication that items will be paid if all of the criteria set
forth are met. Because depository institutions retain the discretion
to pay or not pay the items, that is simply not the case. If the Agencies
are concerned about consumers being misled about overdraft protection
services, the Agencies should not require disclosures that may lead
to such confusion. Rather, the Agencies should require that depository
institutions,
make clear that, even if certain qualifications are met, e.g., an account
meets the depository institution’s definition of “good
standing,” items
may still be returned unpaid because the depository institution retains
the discretion to do so. The emphasis should be on the discretionary
nature of the service, not on disclosing the circumstances in which
the discretion will be exercised.
Clearly disclose program fee amounts. Many depository institutions
provide customers with transaction account agreements that contain
terms and
conditions for the use of multiple types of accounts and services associated
with those accounts. The agreements also provide the disclosures required
under the various regulations that may apply to the accounts such as
Regulation E, Regulation CC and Regulation DD. Because the terms and
conditions and the applicable disclosures are not likely to be amended
very often, depository institutions provide cost disclosures on separate
inserts that may be reprinted to reflect changes in fees or charges
assessed. The foregoing practice does not appear to comport with the
Proposal as
written. The Guidance should clarify that the practice of delivering
a fee schedule that clearly sets forth applicable fees together with
account agreements that cross-reference the fee schedule is acceptable
practice under the Guidance.
Program Features and Operation
Provide election or opt-out of service. As indicated
above, we believe that all depository institutions have provisions
in their transaction
account agreements that provide that the depository institution may,
in its sole discretion, pay or return a check or other item that is
presented against insufficient funds. Thus, we believe that in all
cases, overdraft
protection is automatically provided in transaction account agreements.
The Proposal suggests that each depository institution now disclose
that overdrafts may be paid and invite each and every account holder
to opt
out of the service. Although we clearly recognize the right of consumers
to decline overdraft protection, we do not see the value in requiring
a burdensome opt-out process that does not also clearly explain the
potential negative ramifications of declining the service.
If the Guidance does suggest that consumers be given the right to opt
out of the service, best practices should likewise acknowledge that
depository institutions should obtain a signed written disclosure from
the consumer
that, by opting out, the consumer understands that (a) no overdrafts
will be paid at any time, under any circumstances, no matter what the
size of the overdraft that would be created; (b) that there will be
a fee assessed for each returned item; (c) that the depository institution
is not liable for any fees and charges that are imposed by merchants
or other payees to whom items are returned; and (d) that the depository
institution is not liable for any consequential damages (e.g., late
fees,
default charges, increases in applicable interest rates) as a result
of the return of any item. It seems clear that, if for no other reason
than reputational risk, a depository institution would be ill-advised
not to obtain something in writing from the consumer indicating that
they understand the consequences of an opt-out.
Alert customer before a non-check transaction triggers any
fees. The
Proposal acknowledges that giving prior notice that a given transaction
will trigger an overdraft fee is not always feasible and suggests that
notices be posted instead. We believe that the Guidance should clarify
that there are situations, other than access by an ATM, in which it
is not possible to post notices. Even with advances in technology,
there
may be situations in which it will not be possible to give prior notice,
such as with preauthorized automatic debits. We would suggest that
the Guidance clearly state that, even though such prior notice is not
feasible
in those instances, the benefit to consumers in having those items
paid rather than returned far outweighs the negative effects of eliminating
such transactions from the coverage of an overdraft service simply
because
no prior notice can be provided.
Prominently distinguish actual balances from overdraft protection
funds availability. In interchange transactions, the standards have never
mandated the display of more than one balance. According to shared
network standards,
the balance that must be displayed is the “available balance” on
which the depository institution will base its decision to pay or not
pay an item. An expectation that more than one balance would be displayed
in an interchange transaction is unrealistic in light of existing interchange
rules. If an inquiry is being made at a proprietary machine, it is most
common to disclose a “ledger balance” and an “available
balance.” We believe that use of the terminology “actual
balance” is very misleading to consumers since it implies that
it is the exact amount that is in an account at a particular point in
time. Since transactions may be posting at any point in time and the
account balance is always subject to items outstanding, we believe that
use of the term “actual balance” should be avoided, and,
to our knowledge, no depository institution currently uses the term “actual
balance.” We suggest that the Agencies make clear that disclosing
that something is an “actual” balance may, in and of itself,
prove to be confusing or misleading to consumers.
Promptly notify consumer of overdraft program usage each time used.
We question the necessity, utility and feasibility of providing a restatement
of overdraft protection policies the first time an overdraft is created.
Tracking whether a customer has accessed the overdraft service for
the
first time seems unnecessarily cumbersome and may not be possible under
some systems. Most, if not all, overdraft notices contain all of the
information that the Proposal suggests be included in the notice. Restating
the terms of the overdraft protection service when the service is accessed
for the first time is excessive. We believe that a clear reference
to information previously provided and an offer to provide a copy on
request
should suffice.
The Proposal suggests that, where feasible, the institution should
notify consumers in advance if the institution plans to terminate or
suspend
the consumer’s access to the service. Although we are strongly
committed to full transparency to the consumer, we urge the Agencies
to be more specific with respect to when notification of suspension is
suggested. If the Agencies are suggesting that depository institutions
notify consumers each and every time the service is unavailable for an
account, we are of the view that depository institutions are faced with
an impossible compliance task. An account may not qualify under a system’s
parameters for a short period of time and may “requalify” a
short time later. If no items were presented during that time that would
trigger the service, there is no issue of suspension of the service.
Thus, the issue of qualification arises only at the time an item is presented
for payment against insufficient funds. There is no way to forecast when
that may arise. In addition, because “qualification” is
fluid, depository institutions could be continually notifying consumers
of the
suspension and reinstatement of the service. Moreover, by the time
notification of suspension or reinstatement is received by the consumer,
reinstatement
or suspension may have occurred again.
We would also suggest that such notification gives the impression that
the service is more like a credit line that the depository institution
is obligated to fund rather than a discretionary service. The Agencies
have expressed concerns that depository institutions not mislead consumers
into thinking that there is a guarantee that items will be paid. It
seems that notification that the service is or will be suspended and
subsequent
notice that it is again available may lead consumers to expect that
their items will be honored when in fact they may not be.
Consider daily limits. We disagree that there should be a cap on overdraft
fees. Each item that is paid avoids the possible imposition of retailer-
or payee- assessed fees, late charges and derogatory credit implications.
There are no limits placed on the number of items on which a retailer
or payee may assess a returned item fee. Moreover, such fees are generally
imposed pursuant to statutory provisions that permit collection of
return item fees, plus fees imposed by the payee’s depository
institution.
Thank you for the opportunity to submit our comments on the Proposal
to the Agencies. We would be happy to answer any questions the Agencies
might have regarding our comments and are available to meet with the
staffs of the Agencies at any time to further explain the details of
the Strunk program.
Respectfully submitted,
Sam Davis
President
___________________________________________
1 69
Fed. Reg. 31858 (June 7, 2004) (“Proposal”)
2 Id.
at 31859 (emphasis added).
3 The
difficulty in articulating the difference between an “overdraft
protection
program” and the “discretionary overdraft service” that has
been employed by all depository institutions for many years is illustrated in
the following excerpt from the Pennsylvania Memorandum:
Almost
all depository institutions maintain an overdraft program of some type. In
general,
these types of overdraft programs are (a) a traditional
long-standing discretionary program with an depository institution’s
payment or non-payment of occasional overdrafts, and with the depository
institution assessing or waiving its normal fees applicable to the overdrafts
(b) an overdraft program linked to a line of credit product; or (c) a
discretionary overdraft program.
Memorandum from A. William Schenck, III, Secretary of Banking, Department
of Banking, Commonwealth of Pennsylvania, to the Chief Executive Officers
of all Pennsylvania State-chartered Banks, Bank and Trust Companies,
and Savings Banks, September 30, 2003. We submit that (a) and (c) as
written are indistinguishable.
4 69
Fed. Reg. at 31860.
5 Guidance
and Best Practices for Overdraft Protection Programs, State of Washington
Department of Financial Institutions, February 26, 2004
(“Washington
Guidance”), at p. 3.
6 Id.
at p. 4.
7 We
would point out that, even if a depository institution provides a traditional
overdraft line of credit and/or intra-account transfers for overdraft protection,
the depository institution may still rely upon the contractual provision in the
account agreement to pay an item presented against insufficient funds if neither
of those services is available (e.g., the line of credit is at the maximum credit
available or there are insufficient funds in the linked account).
869
Fed. Reg. at 31860 (emphasis added).
9 As
discussed above, both the Washington Guidance and the Pennsylvania Memorandum
include the overdraft limit among those details of the overdraft service that
should be disclosed to consumers. See Washington Guidance at p. 4 and Pennsylvania
Memorandum at p. 4.
10 69
Fed. Reg. at 31860.
11 Id.
12 Id.
13 Id.
14 Id.
at 31864.
15
Webster’s
New Collegiate Dictionary 226 (1977)
16 FFIEC
Reports of Condition and Income Instructions, Schedule RC-L – Derivatives
and Off-Balance Sheet Items, RC-L-1.
17 69
Fed. Reg. at 31863.
18 In
the following states, dishonored check fee statutes authorize the imposition
of the following charges: Arizona – up to
$25 fee, plus charges assessed by depository institution (Ariz.
Rev. Stat. § 44-6852); Arkansas – up to $25 fee, plus
fees charged by depository institution (Ark. Code. Ann. § 5-37-304(a));
California – up to $25 service charge for first NSF check,
up to $35 service fee for each subsequent NSF check (Cal. Civ.
Code § 1719); Florida – fee not to exceed the greater
of 5% of face amount of check or $25, if face amount less than
$50; $30, if face amount is less than $300; or, $40, if face amount
more than $300 (Fla. Stat. Ann. § 832.07(a)); Georgia – fee
not to exceed the greater of $25 or 5% of face amount, plus charges
assessed by depository institution (Ga. Code Ann. § 16-9-20
(j)); Illinois - greater of $25 or actual costs and expenses, including
reasonably attorneys’ fees (810 Ill. Comp. Stat. § 5/3-806);
Kansas – fee not to exceed $30 (Kan. Stat. Ann. §21-3707);
Kentucky – fee not to exceed $25 (Ky. Rev. Stat. Ann. §514.040);
Louisiana - greater of $25 or 5% of face amount of check (La. Rev.
Stat. Ann. § 2782.B); Minnesota – fee not to exceed
$30 (Minn. Stat. Ann. § 604.113); Mississippi - $30 fee (Miss.
Code Ann. § 11-7-12); New York – lesser amount of fee
agreed upon or $20 (N.Y. Gen. Oblig. Law § 5-328); North Carolina – fee
not to exceed $25 (N.C. Gen. Stat. § 25-3-506); South Carolina
- $30 fee (S.C. Code Ann. §34-11-70); South Dakota – fee
not to exceed $30 (S.D. Codified Laws § 57A-3-421).
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