FDIC Federal Register Citations

To whom it may concern:
We are a user of IMPACT, which offers an overdraft protection program. Based on our experience, we agree with the comments in the attached message prepared by IMPACT. Please accept our comment and consider it in your deliberations of the final regulations.
Thank you for your consideration.
Sincerely,

Jennifer M. Champagne
Chief Financial Officer
Cornerstone National Bank

GUIDELINE COMMENTS

IMPACT has reviewed the newly published Interagency Guidance on Overdraft Protection Programs, published in Volume 69, Number 109 of the Federal Register on June 7, 2004. Comments to these proposed guidelines are due back to any of the agencies before August 6, 2004. IMPACT was pleased to see that the majority of the requirements and best practices are already being followed in financial institutions utilizing the IMPACT Overdraft Privilege Service. However, there are a few areas which we believe are worthy of comment and they are as follows:

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.

CONCLUSION

To the extent that your financial institution would like to join IMPACT in commenting on any or all of the aforementioned areas, or any other covered by the guidelines, your response should be directed as follows (Although these may be submitted to any agency, the FDIC information below will suffice):
You may submit comments by any of the following methods:

Agency Web site:http://www.fdic.gov/regulations/laws/federal/propose.html.
Follow the instructions for submitting comments on the Agency Web site.
E-Mail: Comments@FDIC.gov.
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW.,
Washington, DC 20429.
Instructions: All submissions received must include the agency
name. All comments received will be posted without change to http://www.fdic.gov/regulations/laws/federal/propose.html including any
personal information provided.

June 23, 2004

Clients and Friends of IMPACT:

As anticipated several months ago, the Federal regulators have now proposed “Guidelines on Overdraft Protection Programs” and published those proposed guidelines earlier this month. You should have received a copy by now and be somewhat familiar with them.

We at IMPACT Financial Services think that, for the most part, the Guidelines are good and we commend the agencies for taking this action. However, we plan to comment on a few points….and, we urge YOU to do likewise. Enclosed (or attached, as the case may be) are our comments on five specific issues contained in the proposed guidelines. We are urging you to follow suit and to likewise make your institution’s feelings known. The comment system and procedure WORKS, as we have seen in the past. Thus, we hope that you will participate with us and draft your own comments. You may use ours, verbatim, if you like, or better yet, put your own thoughts and words into it. Either way, please send your comments to your regulatory agency by no later than August 6.
(All comments may be sent to the FDIC and we have included that address, and e-mail address, for your convenience.) I will appreciate receiving a copy, too, or you may send our copy to your IMPACT Sales Rep or Project Manager.

Regards, best wishes and good banking.

Sincerely,

William B. Brady, President & CEO