IMPACT Financial Services, LLC
From: pop.registeredsite.com
Sent: Thursday, August 05, 2004 4:36 PM
To: Comments
Subject: Comments on Proposed Interagency Guidelines on Overdraft Protection
I am submitting comments on the above referenced matter on behalf
of our company, IMPACT Financial Services, LLC, a vendor of overdraft
protection services. I appreciate your consideration of the foregoing:
I. CHARGE OFF OVERDRAFTS AT 30 DAYS:
IMPACT has considered this issue and has created a collection process
designed to minimize losses to the Financial Institution while still
focusing on customer retention. This process is designed to make
systematic contact with the customers and determine which customers
wish to cure their negative balance and which are deserving of being
charged off. This process has been used for quite some time and we
believe that it efficiently manages the risk of the financial institution.
Accordingly, IMPACT would advocate that overdrafts be allowed up
to an aging of sixty (60) days prior to charging off an overdraft
but in no event less than forty-five (45) days as credit union regulations
currently require.
II. UNUSED COMMITMENT REPORTING:
The Proposed Guidelines provide that the amount
of unused commitments should be reported in regulatory reports
when an institution routinely
communicates the available amount of overdraft protection. IMPACT
has advocated loss reserves be maintained by financial institutions
and that these reserves be based on the historical performance
of the overdraft protection service. However, reporting in the manner
suggested by the guidelines would, in IMPACT’s opinion, greatly
overstate the risks associated with this product.
III. FREE ACCOUNT DISCLOSURES:
Financial institutions have greatly enjoyed great success through
marketing Free Accounts. These accounts have proven equally valuable
for a large segment of depositors. However, it would appear to be
common sense that fees can be charged on the account under certain
circumstances which are set out in detail in the depository agreement.
IMPACT would advocate allowing free account advertising with overdraft
protection when conspicuous disclaimers are included in the communication
that make clear that other restrictions may apply.
IV. NOTICES UPON FIRST AND SUBSEQUENT OVERDRAFTS:
The proposed regulations suggest that notices be provided containing
certain specific information upon the first overdraft paid under
the service as well as later uses of the privilege. IMPACT would
not argue that a notice should be issued promptly upon an overdraft
being created. However, the systems which financial institutions
frequently use do not accommodate inclusion of the type of additional
information suggested by the guidelines. Accordingly, IMPACT would
suggest that this suggestion be deleted.
V. REPAYMENT PLANS:
The guidelines suggest that repayment arrangements which are formalized
between a depositor and a bank should be charged off when the underlying
overdraft has aged past thirty (30) days. IMPACT has experienced
a high degree of success in utilizing repayment plans and find that
they provide an additional safety net for the customers. These repayment
arrangements also produce a small degree of risk during the period
in which they are being paid according to their terms. Accordingly,
IMPACT would suggest that current and performing repayment plus not
be charged off.
Travis J. Morrissey
Vice-President and General Counsel
IMPACT Financial Services, LLC
10801 Executive Center Drive
Shannon Building, Suite 511
Little Rock, AR 72211
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