From: Larry Wilson [mailto:LWilson@firstarkansasbank.com]
Sent: Thursday, June 24, 2004 11:55 AM
To: Comments
Subject: Interagency Guidance on Overdraft Protection Programs
To the FDIC:
I have read the above-referenced guidance and have a few comments about
it. First, I will say that our bank has been offering overdraft protection
to our customers since 1989 and have experienced very few complaints or
concerns from our customers. Most of them are very appreciative of our
service and are glad that they are not paying additional fees to merchants,
etc. for checks that would have otherwise been returned by us.
There are a few areas about which I would like to comment:
1. CHARGE OFF OVERDRAFTS AT 30 DAYS: We have carefully considered this
issue and have created a collection process designed to minimize our losses
while maintaining our customer base. Our collection process includes
periodic contact with our customers, which helps us determine which
customers want to cure their negative balance and which ones should be
charged off. We have been doing this for over 15 years. This process has
worked well for us and doesnt create any significant risk for our bank. We
would argue that overdrafts be allowed to age up to 60 days prior to being
charged off.
2. UNUSED COMMITMENT REPORTING: This requirement will only create
additional work and not provide the FDIC (or anyone else) with meaningful
information. Reporting in this manner will only grossly overstate the risks
associated with this product. Many of our customers never overdraw their
account but want the comfort of knowing that if they make a mistake, their
check(s) will be paid. What purpose would it serve to show all of these
accounts with unused commitments when there is very little likelihood that
they would ever use any of the commitment?
3. FREE ACCOUNT DISCLOSURES: We have been advertising free checking
accounts (with overdraft protection) since 1989 and the accounts have
benefited many, many consumers. Those who have utilized the overdraft
protection have understood that they would be charged a fee if they did
overdraw their account. We have disclosed this in our advertising and when
the account is opened. I dont recall one single complaint from a customer
who said that we should not be compensated for the additional service of
paying their check (many think we should only charge $1 or $2 for that
service, however).
4. NOTICES UPON FIRST AND SUBSEQUENT OVERDRAFTS: We have always provided
our customer with a prompt notice of checks paid which caused the customer
to have an overdraft status on their account. The additional information
suggested by the proposed guidelines is unnecessary and will serve no real
purpose. We would strongly encourage you to eliminate this proposal from the
guidelines.
5. REPAYMENT PLANS: The guidelines suggest that repayment arrangements
which are formalized between a depositor and a bank should be charged off
after becoming over 30 days delinquent. We have had very good success in
utilizing these repayment plans and they should not be charged off after the
30 days as proposed. As soon as we determine that the customer is not going
to repay the overdraft, we make the chargeoff. This procedure has been very
effective and has resulted in very little risk to our bank and relatively
few chargeoffs.
It appears to me that you are attempting to solve a problem that doesnt
exist. If you are compelled to do so, do so in a manner that will not
preclude providing the service to the vast majority of the customers who
value it.
Thank you,
Larry T. Wilson
Chairman, CEO and President