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FDIC Federal Register Citations

FIRST ARKANSAS BANK

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 doesn’t 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 don’t 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 doesn’t 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

Last Updated 06/28/2004 regs@fdic.gov

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