From: John Musselman [mailto:jmusselman@kansasstatebank.com]
Sent: Monday, June 21, 2004 4:27 PM
To: Comments
Subject: Joint Agency Notice - Overdraft Protection Programs
Dear Sirs:
I appreciate the opportunity to comment on certain aspects of the
Interagency Guidance on Overdraft Protection Programs. I am commenting
for the first time in my career because I see the benefit that so many
of our customers receive by having a program like this in place.
The proposal identifies a 30 day period from the date of the first
overdrawn status from which the financial institution would be required
to charge off the overdrawn account. My experience over the past 3 years
has been to use a 90 day charge off rule. We see that in the 30 to 60
day time period most of the accountholders are able to resolve any
temporary financial shortfall and repair their account status. By 75 to
90 days the accounts that truely need to be charged off are identified
and charged off. One of our challenges is that as an overdrawn account
balance is abandoned by an accountholder and identified by the bank for
chargeoff the process also involves reporting the account to our
collection agency and into a system that reports accounts closed for
cause to other banks. If we are required to charge off the accounts of
accountholders that wish to maintain their accounts, a great deal of
confusion will be created between the bank and accountholder.
I can envision the following situation occuring with regularity:
The customer overdraws the account.
We send a notice to the customer.
The customer ignores the notice.
The customer receives a statement 30 days later.
The customer makes a deposit using funds that have
been withdrawn from their third party mutual fund.
Between the time the statement was prepared and the
deposit is made the bank closed the account.
The customer having made a deposit begins writting
more checks.
The bank now can't pay the checks and begins
to return them as account closed. ( The bank could
have returned the customer's deposit or it could
remain unposted of a few days because the account
is closed.)
I believe there needs to be a sufficient period of time for the account
to become overdrawn - the statement to render - and a deposit to be made
before action is required to be considered that will negatively impact
the customer. In most situations the bank is in the best position the
determine when that time is appropriate.
The second point I would like to address is the allocation of check
and fee portions of the overdrawn balance. The customer receives a
notice of every overdraft fee assessed. The customer also receives a
detailed statement of activity each month that clearly discloses all
fees assessed on the account. I cannot imagine how further disclosure
with regard to after the fact information will inform the customer of
something they do not already know.
I appreciate your consideration of my comments.
John Musselman SVP
Kansas State Bank
1010 Westloop
Manhattan Ks 66502
785-587-4000 ext 135
jmusselman@kansasstatebank.com
