FDIC Federal Register Citations

From: Bill Thompson [mailto:bthompson@1stMarinerBank.com] 
Sent: Thursday, June 17, 2004 4:22 PM
To: Comments
Subject: Responses to proposals 

We have the following response with respect to the Interagency Guidance on Overdraft Protection Programs:

We have two concerns with the proposed guidance. The first has to do with the requirement to charge off the overdraft balances after 30 days. Since these balances are reported as loans, and are charged off against the allowance for loan losses, this will have very little impact on financial reporting, and no impact on the income statement. The consequence of such a requirement would be to cause the bank to accelerate its collection activity, providing the customer with less time to correct his overdrawn position. The further result will be additional charge offs, which will have to be reported to consumer reporting agencies. The Bank will still continue its collection efforts, and will ultimately recover much of what it charged off, but the consumer's credit report will still be damaged. If it is considered necessary to impose a deadline for charge off of these accounts, we propose a 60-day limit.

Secondly, we are very concerned about the proposal that the bank alert consumers before a non-check transaction triggers any fees--and in particular that such a notice be in a manner that permits consumers to cancel the attempted withdrawal. This is largely unfeasible. An increasing number of account debits occur through point-of-sale transactions, on-line bill pay, and ACH. Attempting to provide advance notice in these instances would require a great deal of systems enhancements, would be very costly, and would be impractical. Consideration should be given to the fact that you separately propose that we illustrate to the customer the types of transactions that can create overdrafts, which we agree with, and which we already do. This should be sufficient. Surely customers understand that these transactions, as well as ATM withdrawals, cause debits to their accounts, and that they can cause overdrafts. The fact that consumers may forget to deduct the effect of these transactions from their checkbooks is a primary reason for the beneficial impact of the overdraft protection program.