| MASSACHUSETTS
BANKERS ASSOCIATION
Office of the Comptroller of the Currency
Attention: Public Information Officer
250 E Street, S.W.
Mail Stop 1-5
Washington, DC 20219
Docket No. 04-14
regs.comments@occ.treas.gov
Mr. Robert. Feldman, Executive Secretary
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, DC 20429
Attention:Comments
comments@fdic.gov
Ms. Jennifer J. Johnson, Secretary
Board of Governors of the Federal Reserve
System
20th Street & Constitution Avenue, N.W.
Washington, DC 20551
Docket No. OP-1198 and R 1197
regs.comments@federalreserve.gov
Regulation Comments
Chief Counsel's Office
Office of Thrift Supervision
1700 G Street, NW
Washington, DC 20552
Docket No. 2003-67
regs.comments@ots.treas.gov
SUBJECT: Interagency Guidance on Over-Draft Protection Programs
Dear Sir/Madam:
The Massachusetts Bankers
Association which represents approximately 220 commercial, savings,
co-operative banks and savings & loan
institutions in Massachusetts and New England appreciates the opportunity
to comment on the proposed inter-agency guidance on over-draft protection
programs.
First, we would applaud
agency staff for the thorough review of bounced-check protection
programs and your conclusions that such
programs are not extensions of credit and not subject to Regulation
Z. We also concur that additional consumer education is necessary
and are generally supportive of a “best practices” approach
to advertising and disclosure.
Having said this, however,
there are several proposed requirements which warrant reconsideration.
In fact, there are several provisions
(including the Fed’s proposed changes to Regulation DD: Truth-in-Savings)
which blur, rather than clarify the distinction between bounced-check
protection programs (whether traditional informal programs or specifically
marketed) and over-draft credit lines. As a matter of course, we
would strongly urge that these proposed regulations only apply to
marketed bounced-check protection programs for which a specific limit
is disclosed.
In fact, the guidance
defines all forms of over-draft protection as a credit service.
This is not accurate. An over-draft line of
credit is a guarantee to pay over-drafts under defined terms. On
the other hand, over-draft bounced-check protection is provided on
a discretionary basis. By not making this distinction, the proposal
requires that all over-draft balances be reported as loans for purposes
of required quarterly financial reports and that banks should adopt
written policies and procedures to assess credit and other risks.
Equally problematic is the suggestion that available amounts of bounced-check
protection programs be reported as “unused commitment.” How
can a disclosed discretionary payment be viewed as a “commitment?” We
would strongly object to these requirements which only add to both
consumer and banker confusion. This language should be deleted.
Likewise, the proposed requirement that over-draft balances be charged-off
within 30 days is equally troubling. Since most over-drafts are corrected
within 30-60 days, allowing a minimum of 60 days will result in few
adverse reports to consumer reporting agencies, a higher incidence
of repayment and less regulatory burden.
With respect to best practices, we would assert that they not be
viewed as mandatory standards or required to be adopted in full by
banks. Member banks should be allowed to design their policies to
meet the needs of their customers and the institution. We would also
add the following:
- Clearly
Explain Discretionary Nature of Program: If over-draft payments are discretionary,
we agree that disclosure information
should not mislead consumers to expect payment is assured. Disclosures
should be specific on this issue. However, requiring a listing of
all circumstances of non-payment provides a false guarantee that
payment will occur in all other situations, when that is not the
case. Banks should simply be required to disclose whether or not
payment is discretionary.
- Alert
Consumers Before a Non-Check Transaction Triggers Fees: While we
are supportive in concept, it is not always possible to
determine accurately if, or when a fee will be imposed. We do agree,
however, that available balances at an ATM should not include funds
available through the bounced-check protection programs.
- Usage
of Over-Draft Protection by Customers: While we are supportive
of banks’ monitoring of these programs, the guidance’s
direction to identify those who are “excessively reliant” is
too vague to be meaningful. Alternatively, banks should have the
discretion to assess customer use and take appropriate action, or
suggest alternative products available. Consumer education on how
to avoid over-drafts should remain the primary focus for all.
With respect to the proposed
revisions to Regulation DD, we would again question the lack of
distinction between Regulation Z over-draft
lines of credit and bounced-check protection plans (both formal and
informal). For example, in Section 230.6 (ii) changes to periodic
statements would be mandated to include year-to-date totals for both
bounced-check protection fees and traditional NSF fees. This is not
only an added regulatory burden cost for all banks (even those without
bounced-check protection programs), but also creates consumer confusion,
ignores the consumer savings of late charges imposed by merchants
and creditors, and further complicates a consumer’s monthly
statement. This requirement should be dropped from the proposal.
Thank you for your consideration of our views.
Sincerely,
Daniel J. Forte
President
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