Connecticut Bankers Association
August 6, 2004
Office of the Comptroller
of the Currency
250 E Street, SW
Washington, DC 20219
Docket No. 04-14
Jennifer J. Johnson, Secretary
Board of Governors of the Federal Reserve System
20th St. & Constitution Ave., N.W.
Washington, D.C. 20551
Docket No. OP-1198
Robert E. Feldman
Executive Secretary
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Regulation Comments
Chief Counsel’s Office
Office of Thrift Supervision
1700 G Street, NW
Washington, DC 20552
No. 2004-30
Becky Baker
Secretary to the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428
Re: Interagency Guidance on Overdraft
Protection Programs 69 FR 31858
June 7, 2004 (VIA E-MAIL)
Dear Sir or Madam:
The Connecticut Bankers
Association (CBA) welcomes the opportunity to comment on the proposed
interagency guidance on overdraft protection
programs, which was issued by the Office of the Comptroller of the
Currency, the Board of Governors of the Federal Reserve System, the
Federal Deposit Insurance Corporation, the Office of Thrift Supervision
and the National Credit Union Administration (collectively, the “Agencies).
CBA Position
CBA supports the ability of community banks to offer various types
of overdraft protection services to their customers. Community banks
also believe it is important to assist their customers in better
managing their finances. We also believe that fair and accurate disclosures,
together with regular financial education, help avoid confusion and
misunderstanding among consumers about the true nature of overdraft
protection and its costs.
While we are supportive of the overall the efforts of the Agencies
to provide meaningful examples of optimal practices relating to overdraft
protection services, we have several concerns about the proposed
guidance, both in terms of format and content. We urge the Agencies
to revise the proposed guidance to both narrow its scope of application
and to address certain ambiguities. In particular:
• The proposed guidance does not draw the important, necessary distinction
between the discretionary nature of overdraft protection services,
which increasingly are automated, and overdraft lines of credit,
which are promises to extend credit under certain defined terms.
CBA opposes aspects of the guidance that would incorrectly label
all forms of overdraft protection as a credit service Only specifically
developed overdraft lines of credit or similar credit products
should be reported as loans, assessed for credit risk and subject
to the Truth in Lending Act (TILA) and its implementing regulation,
Regulation Z.1
• The proposed guidance
fails to recognize that overdraft protection services are a response
to customer-initiated transactions.
All institutions must be able to decide whether to pay checks or
other items initiated by customers and presented against insufficient
funds.
• The proposed guidance
also does not take into account that many customers have come to
expect some form of overdraft coverage.
For institutions that do offer some form of non-credit overdraft
protection, the majority report that customers respond very favorably
to the service and appreciate its benefits.
• The proposed recommendation to “charge off” overdraft
balances after 30 days is unworkable from an operational standpoint
and also would negatively impact customers. It should be increased
to a minimum of sixty days to allow flexibility to the customer and
to allow the bank to properly assess when the chargeoff should occur.
• CBA strongly urges the Agencies to confirm that any best
practices should not be viewed as a minimum standard, but rather
as offering a range of optimal practices that may be adapted to fit
an individual institution’s program and customer base. Institutions
should be able to tailor their policies and procedures to the specific
facts, marketplace concerns, circumstances of their institution,
its customers and the particular aspects of that bank’s overdraft
protection services. We also are concerned that examiners, consumers
and others will view these best practices as mandatory requirements,
which may lead to criticism and the potential for litigation. CBA
strongly urges that the Agencies clarify that it is not necessary
to adopt all of the suggested practices and that the practices are
only guidance.
Thank you for the opportunity to comment on this matter. If you
have any questions, please contact the undersigned at 860-677-5060
or via e-mail at MongellowT@CTBank.com
Sincerely,
Thomas S. Mongellow,
Vice President & Treasurer
Connecticut Bankers Association
______________________________
1 15 U.S.C. § 1601 et seq., 12 C.F.R. Part 226.
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