BANK OF ASHEVILLE July 7, 2004
Robert E. Feldman, Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Dear Mr. Feldman:
We are writing to comment on the new Interagency Guidance on Overdraft
Protection Programs, published in Volume 69, Number 109 of the Federal
Register on June 7, 2004. The Bank of Asheville contracts with IMPACT
Financial Services, and we feel that the majority of the requirements and
best practices are already being followed because of the IMPACT Overdraft
Privilege Service. However, there are a few areas which we believe are
worthy of comment, and they are as follows:
I. CHARGE OFF OVERDRAFTS AT 30 DAYS:
The Bank of Asheville has considered this issue and has created a
collection process designed to minimize losses to the Bank 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 four years, and we believe that it efficiently manages the
risk of the financial institution. Accordingly, we 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. This would also be customer friendly in
that we would allow them the opportunity to repay before reporting a
charge-off to the customers credit.
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. The Bank of
Asheville has advocated loss reserves be maintained by financial
institutions 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 our opinion, greatly overstate the
risks associated with this product.
III. FREE ACCOUNT DISCLOSURES
We have enjoyed 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. The Bank of Asheville would advocate allowing free account
advertising with overdraft protection when conspicuous disclaimers are
included in the communication that makes clear that other restrictions may
apply.
IV. NOTICES UPON FIRST AND SUBSEQUENT OVERDRAFTERS:
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. The Bank of Asheville would not
argue that a notice should be issued promptly upon an overdraft being
created. However, the systems which financial institutions frequently use do
not accommodate inclusion of the type of additional information suggested by
the guidelines. Accordingly, The Bank of Asheville would suggest that this
suggestion be deleted.
V. REPAYMENT PLANS:
The guidelines suggest that repayment arrangements which are formalized
between a depositor and a bank should be charged off when the underlying
overdraft has aged past thirty (30) days. The Bank of Asheville has
experienced a high degree of success in utilizing repayment plans and find
that we 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, The Bank of
Asheville would suggest that current and performing repayment plus not be
charged off.
Thank you for allowing this time for comment. We trust this information
will be helpful in your deliberation.
Sincerely,
G. Gordon Greenwood
President
cc: William B. Brady, President and CEO
IMPACT |