| High
Point Bank and Trust
August 6, 2004
Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, DC 20429
Via e-mail: Comments@FDIC.gov
Subject: Proposed
Guidance with Request for Comment
Interagency Guidance on Overdraft
Protection Programs
We are pleased to respond to the Proposed Guidance on Overdraft Protection
Programs. High Point Bank and Trust recently implemented an overdraft
protection service for our retail customers. This service provides
our customers with an alternative to third party return item fees
and helps protect them as a result of an error or an emergency.
After a thorough review process the Bank selected Pinnacle Financial
Services and Jack Henry & Associates to provide this service
for our customers. We implemented the program adhering to Pinnacle’s
Best Practices and we are pleased to find that they are significantly
inline with the proposed guidance.
The Bank is in
concurrence with the agencies’ general approach
in providing Best Practices regarding ODP programs. We respectfully
offer some comments on the following:
Safety & Soundness
Considerations
The Guidance establishes a clear safety and soundness standard that
overdrafts must be charged-off within 30 days.
Comment: The
Bank has implemented a customer-friendly approach that’s
based on safety and soundness standards requiring prompt notifications
to the customer of the overdraft and an encouragement to bring the
account to a positive balance as soon as possible but no later than
30 days after the account went negative. After 30 days without bringing
the account to a positive balance, the Overdraft Protection Program
is suspended and the Bank works with the customer up to an additional
30 days for collection of the customer’s account before a charge-off
occurs. The Bank supports a longer charge off policy than the 30
days proposed and recommends that 60 days would allow for the reasonable
collection of a depositor account.
When an institution
routinely communicates the available amount of overdraft protection
to depositors,
these available amounts should
be reported as "unused commitments" in regulatory reports.
The Agencies also expect proper risk-based capital treatment of outstanding
overdrawn balances and unused commitments.
Comment: Some
clarification may be helpful with the term “routinely
communicates the available amount of overdraft protection”.
The Bank communicates the Overdraft Protection Limit for each account
type with an initial disclosure to the depositor. The Bank does not
include any available overdraft protection in balances routinely
provided to the depositor. The Bank recommends that this reporting
requirement should be reserved only for contractually binding obligations
such as traditional overdraft lines of credit or other formalized
credit facilities.
Best Practices
Institutions that establish overdraft protection programs should
take into consideration the following practices that have been implemented
by institutions and that may otherwise be required by applicable
law.
Program Features and Operation
• Alert
consumers before a non-check transaction triggers any fees. When
consumers
attempt to use means other than checks to
withdraw or transfer funds made available through an overdraft protection
program, provide a specific consumer notice, where feasible, that
completing the withdrawal will trigger the overdraft protection fees.
This notice should be presented in a manner that permits consumers
to cancel the attempted withdrawal or transfer after receiving the
notice. If this is not possible, then post notices on proprietary
ATMs explaining that withdrawals in excess of the actual balance
will access the overdraft protection program and trigger fees for
consumers who have overdraft protection services. Institutions may
make access to the overdraft protection program unavailable through
means other than check transactions.
Comment: The Guidance does not address POS terminals, most of which
are located in retail stores throughout the country. ATM and POS
systems are driven by the same systems and balance mechanisms. Clearly,
customers want access to their overdraft protection limits at these
locations. The absence of clear guidance concerning the inability
of institutions to provide advance notice to consumers at POS may
create an expectation that institutions should not make overdraft
protection available at POS locations.
If you should have any questions, please let me know.
Sincerely,
Steven V. Hall
Senior Vice President
High Point Bank and Trust
|
