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
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