FDIC Federal Register Citations

KANSAS STATE BANK 

From: John Musselman [mailto:jmusselman@kansasstatebank.com] 
Sent: Monday, June 21, 2004 4:27 PM
To: Comments
Subject: Joint Agency Notice - Overdraft Protection Programs
 

Dear Sirs:

I appreciate the opportunity to comment on certain aspects of the Interagency Guidance on Overdraft Protection Programs. I am commenting for the first time in my career because I see the benefit that so many of our customers receive by having a program like this in place.

The proposal identifies a 30 day period from the date of the first overdrawn status from which the financial institution would be required to charge off the overdrawn account. My experience over the past 3 years has been to use a 90 day charge off rule. We see that in the 30 to 60 day time period most of the accountholders are able to resolve any temporary financial shortfall and repair their account status. By 75 to 90 days the accounts that truely need to be charged off are identified and charged off. One of our challenges is that as an overdrawn account balance is abandoned by an accountholder and identified by the bank for chargeoff the process also involves reporting the account to our collection agency and into a system that reports accounts closed for cause to other banks. If we are required to charge off the accounts of accountholders that wish to maintain their accounts, a great deal of confusion will be created between the bank and accountholder. 
I can envision the following situation occuring with regularity:
The customer overdraws the account.
We send a notice to the customer.
The customer ignores the notice.
The customer receives a statement 30 days later.
The customer makes a deposit using funds that have 
been withdrawn from their third party mutual fund.
Between the time the statement was prepared and the 
deposit is made the bank closed the account.
The customer having made a deposit begins writting
more checks.
The bank now can't pay the checks and begins 
to return them as account closed. ( The bank could 
have returned the customer's deposit or it could 
remain unposted of a few days because the account 
is closed.)
I believe there needs to be a sufficient period of time for the account to become overdrawn - the statement to render - and a deposit to be made before action is required to be considered that will negatively impact the customer. In most situations the bank is in the best position the determine when that time is appropriate.

The second point I would like to address is the allocation of check and fee portions of the overdrawn balance. The customer receives a notice of every overdraft fee assessed. The customer also receives a detailed statement of activity each month that clearly discloses all fees assessed on the account. I cannot imagine how further disclosure with regard to after the fact information will inform the customer of something they do not already know.

I appreciate your consideration of my comments.

John Musselman SVP
Kansas State Bank 
1010 Westloop
Manhattan Ks 66502
785-587-4000 ext 135
jmusselman@kansasstatebank.com