Peoples
State Bank
From: John J Blake III [mailto:jjblake@peoplesstate.com]
Sent: Tuesday, July 13, 2004 8:25 AM
To: Comments
Cc: Angela B Rivers
Subject: Joint Agency Notice - Overdraft Protection Programs
I am submitting
comments on behalf of Peoples State Bank located in Many, Louisiana,
FDIC
#8801. We are a $283 million bank with offices
in five parishes in Louisiana. We began offering "Bounce Protection" in
1999 and our customers appreciate the overdraft privilege that this
program provides. We feel it's important to take this opportunity
to express our concerns regarding the proposed guidance.
1. Best Practice of Charging-Off Overdrafts within 30 days: We feel
the 30-day time limit would not be beneficial to our customers who
use "Bounce Protection". Currently, if our customer, with "Bounce",
does not make deposits to cover their overdrafts after 70 days, our
software will automatically charge-off the account. During the 70
days, we are working with the customer to determine if they will
be able to cover the overdrafts, and if not, we provide options like
our repayment program. Therefore we feel it would be more beneficial
to our customers to keep the 70-day time limit because our customers
are accustomed to this practice. A notice is mailed to our customer
from our bank each time their account is overdrawn so the customer
is aware of their overdraft status. A series of letters are also
mailed. If the overdrafts are not paid within 30 days, the account
is suspended. If the customer chooses to enter our repayment program,
he/she will be allowed to pay back the amount they are overdrawn
within a twelve- month period, without paying any interest or additional
fees. In most cases, we will restore their "Bounce Protection" upon
receipt of the full amount owed. Allowing a 70-day time limit will
provide more flexibility to banks. This flexibility will be greatly
appreciated by customers who do not receive paychecks on a weekly
or bi-weekly basis. Charging-off the account after 30 days will only
hurt the customer, not the bank. Most banks report account charge
offs monthly to companies like "TeleCheck" and "Chex
Systems". We feel the 30-day time limit will create problems
for many customers who are able to cover their overdrafts and avoid
negative reporting on their check writing history if more than 30
days is provided to them.
2. Safety & Soundness Issue of Reporting "Unused Commitments":
We believe this would be costly because of additional software that
would be required to monitor "unused commitments" on "Bounce
Protection". In addition to "Bounce", we offer the
traditional "Overdraft Protection," which is a line of
credit to cover overdrafts and we do not report "unused commitments" on
this service. We feel this requirement would be a tremendous burden
to banks.
3. Marketing and Communications Proposal Regarding Opt Outs: Our
customers may request that "Bounce Protection" be removed
from their accounts at any time. The only time a customer will be
charged is if he/she goes into the overdraft privilege limit provided
with their particular account type. The customer is in total control
of using or not using this privilege. When customers overdraw their
accounts, we charge a standard fee for every item that exceeds their
balance. The benefit to our customers who have "Bounce Protection" is
that we will pay their checks or allow POS transactions when the
total amount is within their allowed limits. This saves our customer
the additional charges that would be incurred by the merchants who
receive these checks. The customer is free to avoid any insufficient
funds charges by simply not making withdrawals that exceed their
available balance. Providing an "opt out" would be labor
intensive and time consuming which would not be beneficial to banks.
We urge you reconsider the "opt out" requirement.
4. Marketing
and Communications In Regards to Alerting Consumers Before Non-Check
Transactions Trigger Any Fees: This would require
an expensive software upgrade that would not be cost effective.
If our customers have the ability to access their "Bounce Protection" limit
by writing a check but not by POS or ATM, this would require our
bank to keep two sets of records for each customer who has "Bounce
Protection". This requirement would be very time-consuming for
banks and will cause great confusion among our customers. With Check
21 on the horizon, we feel it will be even more beneficial for customers
to have some form of "overdraft protection" for all of
their transactions.
Thank you for the opportunity to express our concerns.
John J. Blake III
President & CEO
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