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HAVANA NATIONAL BANK
July 20, 2004
Robert E. Feldman, Executive Secretary
Federal Deposit Insurance
Corporation
550 17th Street NW
Washington, DC. 20429
The officers of the Havana National Bank have reviewed the Interagency
Guidance on Overdraft Protection Programs, published in Volume 69,
Number 109 of the Federal Register on June 7, 2004. While the majority
of the proposed requirements and best practices are already in place
at our bank, we believe that there are a few areas of this proposal
that are worthy of comment.
First, the proposed guidelines call for overdrafts and their related
repayment plans to be charged off thirty days after the initial overdraft.
We have had a great deal of success in putting repayment plans in
place after thirty days and collecting the full amount of the overdraft.
If the customer is willing to agree to a repayment plan, we do not
believe that the overdraft should be charged off until the customer
has defaulted on the repayment plan. In the event that the customer
is not willing to agree to a repayment plan, we do not believe that
banks should be forced into charging off the overdraft any sooner
than the forty five days that credit unions are allowed.
Second, the proposed
guidelines call for reporting unused preauthorized overdraft limits
as unused
commitments on the Quarterly Report of
Condition. We believe that this would artificially inflate the amount
of risk reported by most institutions. Banks have always had the
option of paying overdrafts for their customers. Prior to putting
a preauthorized overdraft program in place it was impossible to quantify
the amount of overdrafts that management would have approved the
payment of. Additionally, for accounts that are not in the preauthorized
program such as small business and farm accounts, how can we quantify
what the "unused commitment" amount would be for each of
those customers. By carefully monitoring which customers are extended
the preauthorized overdraft privilege we can effectively manage the
risk of the program. Implementing the proposed change in reporting
would only serve to make the Quarterly Reports of Condition a less
accurate measure of risk and would eliminate the ability to compare
risk after the change to the risk prior to the change.
Third, the existence of an authorized overdraft program should not
preclude advertising free checking accounts. As long as fees for
authorized overdrafts are properly disclosed in the deposit account
agreement, there should be no additional restrictions on advertising.
By choosing to use their overdraft privilege, the customer chooses
to pay the associated fee. If the customer chooses not to use their
overdraft privilege, the account can indeed be a free account.
The overdraft privilege is an additional service that most customers
do not object to paying for.
Thank you for your time and consideration.
Jeffery A. Bonnett
President
Kennth H. Emme
Chairman of the Board
Donald J. Roch
Compliance Officer
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