Iowa Trust and
Savings Bank
From:
Colleen Heldt [mailto:cheldt@iowatrustbank.com]
Sent: Monday, July 19, 2004 5:52 PM
To: Comments
Subject: Proposed Guidance with Request for Comment Interagecy Guidance
on Overdraft Protection Programs
7-19-04
Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, D.C. 20429
Mr. Feldman:
We are pleased to respond to the Federal Deposit Insurance Corporation's
request for comment concerning Interagency Guidance on Overdraft
Protection Programs and the proposal to amend Regulation DD.
Iowa Trust and Savings Bank is an 85 million dollar bank in a rural
community of approximately 4,000 citizens. We have offered the ODP
program for approximately 4 months and have received very positive
comments. Our customer base appears to appreciate the benefits of
the program.
In general, we believe the proposed rule change and guidance are
a win/win for consumers and financial institutions alike. Consumers
will be getting sufficient information about the costs of the programs
while the programs will still be exempt from the complicated APR
disclosures and finance charge calculations required under Regulation
Z. Our position has always been to favor regulatory guidance that
will protect our customers.
We do have some concerns about a few of the items contained in the
proposals.
* The Guidance establishes a clear safety and soundness standard that overdrafts
must be charged off within 30 days. Our program opts for a customer-friendly
approach that's based on safety and soundness standards requiring prompt notifications
to the customer of the overdraft and an encouragement to bring the account
to a positive balance as soon as possible. We support a longer charge off policy
than the 30 days proposed and recommend that 60 to 90 days would allow for
the reasonable collection of a depositor account.
* When an institution routinely communicates the available amount of overdraft
protection to depositors, these available amounts should be reported as "unused
commitments" in regulatory reports. The Agencies also expect proper risk-based
capital treatment of outstanding overdrawn balances and unused commitments.
We feel that with that language in the guidance, any "disclosed program" would
appear subject to the reporting requirement. It is our position that this reporting
requirement should be reserved only for contractually binding obligations such
as traditional lines of credit or other formalized credit facilities.
* Institutions that establish overdraft protection programs should take into
consideration the Best Practices that have been implemented by institutions.
We concur with the bankers attending the June 24, 2004 meeting of the Federal
Reserve Board Consumer Advisory Council meeting when noting that this language
would be problematic because examiners may use the individual Best Practices
as checklist to determine compliance with the Guidance using a "line-by-line" approach
rather than as a general guideline for best practices worthy of management
consideration.
* Under the
Reg DD proposals, it appears there is a subtle attempt to distinguish
vendor driven
programs from in-house programs, with
a specific comment stating: "What generally distinguished the
vendor programs from institutions' in-house automated processes is
the addition of marketing plans that appear designed to promote the
generation of fee income by stating a dollar amount that consumers
would be allowed to overdraw and by encouraging consumers to overdraw
their accounts and use the service as a line of credit." While
we do not believe vendor driven programs are more or less problematic
than in-house programs, we note that the proposal clearly attempts
to distinguish between programs that disclose or "market" an
available ODP limit as opposed to those who do not disclose their
payment decision-making process to the consumer. Our position in
this regard is that disclosing a dollar limit is not promoting overdrafts
as a short term use of credit but rather providing the customer with
information in the form of a specific dollar amount that may generally
be paid as float for after hour deposits (in some systems) or in
the event of an inadvertent overdraft.
* The Board requested comment on whether the requirement to disclose
cumulative year-to-date fee totals should be limited to institutions
that market overdraft payment services. We generally support the
disclosure as beneficial to all consumers, rather than targeting
only institutions with programs that disclose their ODP limit amounts.
We are confident that our overdraft protection program has the customer's
best interest at hand and will meet most if not all of the best practices
listed. As consumer protection is the motive for your proposals and
the basis for our response, we respectfully ask that you consider
our thoughts when finalizing interagency guidance or amendments to
regulation.
Thank you for your time.
Sincerely,
Colleen Heldt, Compliance Officer
Iowa Trust and Savings Bank
Emmetsburg, IA
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