FDIC Federal Register Citations

August 5, 2004

Mr. Robert E. Feldman, Executive Secretary
ATTN: Comments
FDIC
550 17th Street NW
Washington, DC 20429

Re: Comments on Interagency Guidance on ODP Programs

The Paducah Bank and Trust Company is a $370 million bank with five offices located in Paducah, Kentucky. We currently offer the Pinnacle Financial Strategies’ Bounce Protection^SM to our checking account customers and feel that the charges associated with this service should not be considered to be finance charges as defined by Regulation Z.

We provide this service to all customers once the account has been open for 30 days as long as that account is in good standing at that time. No credit check is performed to determine eligibility for this service, and there is no contractual obligation between the customer and the Bank. We provide customers with a brochure describing this service at account opening and explain the criteria for eligibility at that time, as well as inform them of the overdraft limit for their account type. There is no annual fee for this service; the customer is never charged interest or daily fees in conjunction with this program. In the event the customer’s account becomes overdrawn, he/she is charged our standard overdraft fee (which is charged regardless of whether or not the account has this service) but the item is paid. This allows the customer to avoid any embarrassment that could arise due to overdrafts, guards against any damage a dishonored item could cause to their credit rating, and prevents the customer from having to pay additional fees for the overdraft to the affected merchant. In order for a customer to maintain this service, he/she must only make regular deposits and bring the account to a positive balance at least once every 30 days. These deposits allow us to recover any overdrafts and associated charges on a regular basis.

We do feel that full disclosure of this service and clear communication with our customers is vitally important. However, since we feel that this service does not constitute a loan, we feel that regulatory measures regarding programs of this type would be better addressed through Regulation DD.

The suggested 30-day charge-off period would be a disaster for both the Bank and the consumer. Customers often need more than 30 days to bring an account back to a positive balance. If it were mandatory to charge off overdrawn accounts at 30 days, this would cause great harm to the credit records of many hard-working and well-intentioned deposit customers. It would also cause the Bank’s charge offs to greatly increase. Also, it would create unnecessary administrative burden with closing accounts and reopening accounts when the customer really only needed a few more days to bring the balance to a positive status. We would also expect the Bank’s recoveries to increase as well, but only with additional collection expenses incurred, thus harming the profitability of the Bank.

Reporting the "unused" commitment of overdraft protection is unneeded and not reflective of what the protection is all about—which is a courtesy that can be removed at the Bank’s discretion. Given the discretionary nature of this service, there is no true commitment.

The additional reporting of monthly and cumulative overdraft fees on customer statements, separated between fees incurred under overdraft protection versus returned items, is excessive and burdensome—the fees are already clearly stated on each monthly statement and our customers receive a daily notice of fees as overdraft items are honored or returned.

The requirement of any sort of "notice" for non-check transactions before the overdraft is incurred is unworkable in the majority of situations since it would require us to be online-real time for point of sale and to monitor all ACH transactions. This would not only be expensive, it would also be burdensome. Both of those factors would be harmful to customers as fees would increase to cover the increased maintenance costs.

A cap or other limit on the number and/or amount of overdraft fees does not seem fair as well. A cap would create an uneven playing field with the merchant who is not limited in fee assessment and would lead to more returned items, which would be to the detriment of our customers.

The suggestion for a formal "opt out" process would be burdensome and, without some very specific disclosures on the impact of the opt-out (no discretion to honor a check, impact on credit, additional merchant fees, etc.), would create reputation risk to the Bank.

Thank you for consideration of our concerns.

Sincerely,

Joseph H. Framptom,
Chairman and CEO

Wallace B. Bateman
President

John H. Durbin
Chief Financial Officer

Victor G. Bopp
Chief Risk Officer

Russell G. Smith
Compliance Officer