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FIRST BANK
July 30, 2004
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th
Street, NW
Washington, DC 20429
Dear Mr. Feldman,
First Bank has reviewed the newly published Interagency Guidance
on Overdraft Protection Programs, Published in Volume 69, Number
109 of the Federal Register on June 7, 2004 and our comments are
enclosed..
We appreciate the opportunity to respond.
Sincerely,
James H. Garner
President
I. CHARGE OFF OVERDRAFTS AT 30 DAYS:
First Bank has considered this issue and has created a collection
process designed to minimize losses to our Institution while still
focusing on customer retention. This process is designed to make
systematic contact with the customers and determine which customers
wish to cure their negative balance and which are deserving of being
charged off. This process has been used for quite some time and we
believe that it efficiently manages our risk. Accordingly, First
Bank would advocate that overdrafts be allowed up to an aging of
sixty (60) days prior to charging off an overdraft but in no event
less than forty-five (45) days as credit union regulations currently
require.
II. UNUSED COMMITMENT
REPORTING:
The Proposed Guidelines provide that the amount of unused commitments
should be reported in regulatory reports when an institution routinely
communicates the available amount of overdraft protection. First
Bank has advocated loss reserves be maintained by us and that these
reserves be based on the historical performance of the overdraft
protection service. However, reporting in the manner suggested by
the guidelines would, in First Bank's opinion, greatly overstate
the risks associated with this product.
III. FREE ACCOUNT
DISCLOSURES:
First Bank has had great success through marketing Free Accounts.
These accounts have proven equally valuable for a large segment of
depositors. However, it would appear to be common sense that fees
can be charged on the account under certain circumstances which are
set out in detail in the depository agreement. First Bank would advocate
allowing free account advertising with overdraft protection when
conspicuous disclaimers are included in the communication that make
clear that other restrictions may apply.
IV.
NOTICES UPON FIRST AND SUBSEQUENT OVERDRAFTS:
The proposed regulations suggest that notices be provided containing
certain specific information upon the first overdraft paid under
the service as well as later uses of the privilege. First Bank would
not argue that a notice should be issued promptly upon an overdraft
being created. However, the systems which First Bank frequently use
do not accommodate inclusion of the type of additional information
suggested by the guidelines. Accordingly, First Bank would suggest
that this suggestion be deleted.
V. REPAYMENT
PLANS:
The guidelines
suggest that repayment arrangements which are formalized between
a depositor and First Bank should be charged off when the
underlying overdraft has aged past thirty (30) days. First Bank has
experienced a high degree of success in utilizing repayment plans
and find that they provide an additional safety net for the customers.
These repayment arrangements also produce a small degree of risk
during the period in which they are being paid according to their
terms. Accordingly, First Bank would suggest that current and performing
repayment plus not
be charged off.
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