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FDIC Federal Register Citations

 

Security Bank


July 19, 2004


Mr. Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th St., NW
Washington, D.C. 20429

RE: Interagency Guidance on Overdraft Protection Programs [No. 2004-30]

Dear Mr. Feldman:

We are in receipt of and have reviewed the document referenced above wherein your and other Federal Governmental Agencies have asked for comment from interested parties concerning your proposed Guidance on Overdraft Protection Programs. Security Bank Corporation is a community bank holding company headquartered in Macon, GA that offers a variety of banking products and services throughout Middle Georgia and in Brunswick, GA on the Georgia coast. Our subsidiary banks include: Security Bank of Bibb County, Security Bank of Houston County, and Security Bank of Jones County.

We pride ourselves in providing superior banking products and service to our customers and have been offering a bounce protection product for over two years. Customer reception of the product has been outstanding and the product has become one of the most popular retail products we’ve ever offered. We also pride ourselves in treating our customers fairly and have made significant efforts to make sure the product was fairly priced and appropriately presented to our customers. Consequently, we have no issue with the majority of the Guidelines as proposed in your document as we are already adhering to the majority of your proposals. Some of your proposed guidelines however do present us with significant concern and the balance of this letter will address those areas of your document.

On Page 31859, Section II. you suggest, “…overdraft balances generally should be charged-off within 30 days from the date first overdrawn.” While clearance of an overdraft should be a priority item for both the customer and the bank, it is frequently unrealistic to expect the customer to completely clear an overdraft within 30 days. Overdrafts can occur for a myriad of reasons and at any time of the month. Depending on when the overdraft occurs and on the efficiency of the mail service, it could take several days before the customer is even aware that they’ve activated the service. The situation could be exacerbated if the customer was out of town or simply did not attend to their mail for several days. And, frequently the customer needs some time to address the overdraft amount. By the time both notification and repayment are accommodated, 30 days is frequently not enough. In recognition of the importance of the matter, we’d encourage you to amend the Guideline to require direct contact with the customer within 45 days and to charge off any remaining overdraft at 60 days. This timeframe would allow ample time to notify the customer and to reach a mutually satisfactory resolution without imposing a hardship on the customer or the bank. Finally, it would keep charge-off procedures consistent with those used for other types and classes of accounts. Commercial, small business and non-Bounce retail accounts are routinely charged off when they have been overdrawn for 60 consecutive days. To create a different standard for Bounce customers would place them at an unfair disadvantage to other customers who may not be any more credit-worthy than the Bounce customer.

We do agree that the existence of a repayment plan should not extend the charge-off determination period beyond the 60 days suggested above. And, we do agree that charge-offs should be posted against the bank’s allowance for loan and lease losses while accrued fees on said accounts should be reversed against the relevant income accounts. However, we simply do not think that requiring overdrawn accounts to be charged off within 30 days is reasonable either for the customer or for the bank.

On Page 31863, you suggest “… describe the circumstances in which the institution would refuse to pay an overdraft ...”. Compliance with this suggestion would be either so extensive or so generalized that the resulting explanation would be virtually meaningless to the customer. It is impossible to detail all the circumstances where the bank might decide to refuse to pay an overdraft, or even to list enough “what if’s” to be meaningful. Furthermore, because overdrafts are payable at the bank’s discretion, it is possible to pay an overdraft for a customer one day and to refuse to pay the overdraft for the same customer in substantially the same circumstance the next. Such descriptions would necessarily be highly hypothetical and would be of little or no value to the consumer.

On Page 31863, you suggest, “Alert consumers before a non-check transaction triggers any fees.” While our informative collateral pieces clearly disclose this possibility and our staff is trained to highlight this to our customers, there is no practical way to comply with this suggestion for point-of-sale transactions. To comply with this suggestion would require interrupting each transaction to ask the customer if they wanted to proceed which would, in turn, embarrass the customer, slow the transaction line causing customer frustration and would probably result in a significant rise in customer complaints. Posting a notice on proprietary ATM’s warning the customer that activating the bounce protection feature is a reasonable alternative.

As I said previously, other suggestions your document makes are, in the main, reasonable and we are already complying with the majority of them. As a member of the financial services industry we take very seriously our responsibility to our customers to provide quality services at reasonable prices. Providers who engage in predatory activities should be dealt with in the appropriate manner by the appropriate authorities, and their predatory activities halted. Unfortunately, we are unconvinced that any amount of regulatory ‘tightening’ will ever be sufficient to prevent periodic abuses or nefarious activity which takes advantage of unwitting consumers. It is ultimately the consumer who must take responsibility for exercising sound judgment in financial matters. They should select the financial institutions with which they do business with care and they must understand how and how much services offered by those companies will operate and cost.

We appreciate this opportunity to offer these comments. Thank you for your careful consideration.

Sincerely,

Richard A. Collinsworth
Executive Vice President
Chief Operating Officer
Security Bank Corporation
P.O. Box 4748
Macon, GA 31208



Last Updated 07/20/2004 regs@fdic.gov

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