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FDIC Federal Register Citations

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.


Last Updated 08/10/2004 regs@fdic.gov

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