Community
First Bank
From: Jeff Griffith [mailto:JGriffith@c1stbank.com]
Sent: Tuesday, July 13, 2004 12:56 PM
To: Comments
Cc: Fred Shepherd; 'lritter@impactfinancial.com'
Subject:
GUIDELINE COMMENTS
Community 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. Comments to these proposed
guidelines are due back to any of the agencies before August 6, 2004.
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:
Community First Bank has considered this issue and has a collection
process designed to minimize losses to the Financial 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 some time and we believe that it efficiently manages the
risk of the financial institution. Accordingly, we suggest 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. We
suggest loss reserves be maintained by financial institutions and that these
reserves be based on the historical performance of the overdraft protection
service. We feel reporting in the manner suggested by the guidelines would
greatly overstate the risks associated with this product.
III. FREE ACCOUNT DISCLOSURES:
Financial institutions have greatly enjoyed 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. We 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. We 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, we 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. We have 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, we suggest that
current and performing repayment plans not be charged off.
Jeffery Allen Griffith
Senior Vice-President
Community First Bank
3685 Blue Ridge Blvd
Walhalla, SC
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