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#1564546 - 06/14/11 12:22 PM Re: Overdraft Guidance [Re: rlcarey]
donnac Offline
Platinum Poster

Registered: 02/11/03
Posts: 541
John - I have a follow-up question to your caveat:

CAVEAT: As soon as you have a customer realize that a cap applies (and it won't take long if you have some "frequent flyers" in your program), they might get the idea they'll get coverage for no fee. And they'd be correct, if that's how you operate your program. But many banks, I imagine, will be starting to return checks unpaid after the daily cap is reached (as is their right). That may prove a surprise to customers if they've not had a check bounced in a while.

QUESTION: Do you think banks will start returning the items & charging the NSF fee since the NSF fees aren't considered OD fees? This way banks will still be earning the income, just not by the customer going into debt.

Thanks.

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#1564594 - 06/14/11 01:06 PM Re: Overdraft Guidance [Re: donnac]
John Burnett Online
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Registered: 10/27/00
Posts: 30531
Loc: Cape Cod
Well, let's just say that if it were my bank and I had a say in policy, I'd recommend doing just that, but I would try to find a way to make the change as "gently" as possible if I had a lot of consumers "hooked" on overdrafts as part of their routine (there are a lot of consumers in those straits, I believe). In spite of the fact that you've disclosed that the bank retains discretion in the payment of overdrafts, if your actions are such that you don't return many OD items, that's what consumers are used to.

I do think that consumers who are thinking that the FDIC (or OCC now) has given them a victory over banks that have lured them down the garden path toward perpetual overdraft status and overwhelming fees will get a rude awakening when checks start bouncing and they start getting hit with bounced check fees by the payees.
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#1564765 - 06/14/11 03:48 PM Re: Overdraft Guidance [Re: c@c]
dcl1963 Offline
100 Club

Registered: 02/28/06
Posts: 172
Loc: LA
Getting down to the July 1st date and haven't implemented all aspects of the Guidance as we're awaiting results of a 3rd party review & recommendation. Will have to take our medicine at the next Exam if not completed by July 1st, any one else pushing the deadline?
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In God we trust, all others pay cash. . . Jean Shepherd

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#1565851 - 06/16/11 12:44 PM Re: Overdraft Guidance [Re: dcl1963]
LawAnd Order Offline
Junior Member

Registered: 10/02/06
Posts: 43
We're going to send out a notice each time a customer exceeds the 6 occasions where an OD fee is charged. Would it be frownded upon to include a sentence that if they no longer want to be contacted regarding their excessive ODs, that they could contact the bank to cease the notifications? Or are we still obligated to send the notices no matter what?

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#1565869 - 06/16/11 12:54 PM Re: Overdraft Guidance [Re: LawAnd Order]
John Burnett Online
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Registered: 10/27/00
Posts: 30531
Loc: Cape Cod
If yours is an FDIC-supervised institution, read through the Illustrations at the end of the FDIC FAQ, in particular "Approach #2." It might fit what you're describing.
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#1566000 - 06/16/11 02:43 PM Re: Overdraft Guidance [Re: John Burnett]
LawAnd Order Offline
Junior Member

Registered: 10/02/06
Posts: 43
Yes, in fact that was what I was referring to but wanted to be sure that I was reading it correctly. I'm assuming by your response that such a sentence would be okay?

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#1566095 - 06/16/11 03:54 PM Re: Overdraft Guidance [Re: LawAnd Order]
Farm Girl Offline
New Poster

Registered: 12/16/02
Posts: 18
Loc: Missouri
After we have sent the counseling notification to a customer,say that customer contacts us and says they don't want us to contact them again. We would at that point delete the code to give them the notice. My question is if we delete them from receiving the notice, is that permanent or do we have to start the notices again after the next twelve month rolling period begins?

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#1566130 - 06/16/11 04:25 PM Re: Overdraft Guidance [Re: Farm Girl]
John Burnett Online
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Registered: 10/27/00
Posts: 30531
Loc: Cape Cod
Originally Posted By: Farm Girl
After we have sent the counseling notification to a customer,say that customer contacts us and says they don't want us to contact them again. We would at that point delete the code to give them the notice. My question is if we delete them from receiving the notice, is that permanent or do we have to start the notices again after the next twelve month rolling period begins?


There's nothing in the Guidance or the FAQ to "guide" you on this question. The customer may honestly mean "don't ever darken my door again with this information." But your examiner may feel that "forever" is too long. And rolling twelve-month periods, by definition, begin continuously. You might consider hanging the "do not disturb" sign on the customer's record for as long as a year, and see if that passes the examiner's laugh test. You might even include a policy that you'll look again at the end of the [year or other period] and, if the customer is still making excessive use of the overdraft service, unilaterally deny further access (with notice, of course) or close the account.
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#1566146 - 06/16/11 04:32 PM Re: Overdraft Guidance [Re: John Burnett]
Farm Girl Offline
New Poster

Registered: 12/16/02
Posts: 18
Loc: Missouri
Thanks so much John!

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#1566775 - 06/17/11 06:08 PM Re: Overdraft Guidance [Re: Farm Girl]
Snowmann Offline
New Poster

Registered: 02/18/11
Posts: 16
In the FAQ, they gave an example for daily limits on overdraft fees that states "some institutions have implemented limits on the number of transactions that will be subject to a fee, or on total allowable fees (e.g., a specific maximum dollar amount of allowable fees per day)."

An NSF fee would be included in this daily maximum allowable fee limit, so my feeling was that this should be counted in the 6 per 12 month count as well. Am I misinterpreting this?

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#1566787 - 06/17/11 08:26 PM Re: Overdraft Guidance [Re: Snowmann]
Dani York, CRCM Online
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Registered: 04/13/05
Posts: 3271
Loc: TN
A fee for returning an item does not count as an occasion. Only fees charged to pay an account into the negative are counted. This is per the FDIC conference call several weeks ago toclarify their guidance.
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#1566947 - 06/20/11 11:12 AM Re: Overdraft Guidance [Re: Dani York, CRCM]
AmyH Offline
Member

Registered: 06/12/07
Posts: 72
Is anyone treating sole proprietors with business accounts as a consumer for the Overdraft Guidance which would require counseling?

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#1567002 - 06/20/11 12:06 PM Re: Overdraft Guidance [Re: lsmith]
Tristan's Mom Offline
Member

Registered: 04/18/06
Posts: 54
On a similar note, Under I Defining Automated and Ad Hoc Programs "The FDIC's FAQ #3 states "specific supervisory expectation relate only to automated overdraft payment programs,..."

However,

Under III Fee Limits and Maximizing Fees, the clarification does not specify if the daily limit applies strictly to overdraft fees assessed through automated programs, or across the board.

So what is the interpretation of this? Even if we work through the items "ad hoc" must we have a daily overdraft limit in place?

And if the daily limit also applies to add hoc overdraft payments, is it safe to assume that the daily limit applies only to consumers?






Edited by Tristan's Mom (06/20/11 12:27 PM)
Edit Reason: Incomplete

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#1567140 - 06/20/11 02:49 PM Re: Overdraft Guidance [Re: Tristan's Mom]
RR Joker Offline
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Registered: 11/15/02
Posts: 16362
Loc: The Swamp
All of this applies to automated plans only. However, ad hoc banks are considering either/and/or de minimis and daily max.
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#1567739 - 06/21/11 02:19 PM Re: Overdraft Guidance [Re: RR Joker]
ahkcompliance Online
Diamond Poster

Registered: 09/10/08
Posts: 1773
Loc: Midwest
What are others doing regarding providing information about other alternatives. We are going to send a notice when they get 6 in a rolling 12 month. We will discuss otehr options available. Is anyone going to sending anything kind of brochure related to overdrafts?

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#1567806 - 06/21/11 03:12 PM Re: Overdraft Guidance [Re: ahkcompliance]
RR Joker Offline
10K Club

Registered: 11/15/02
Posts: 16362
Loc: The Swamp
ahk, at my previous bank, we had an ODP program. At account opening we gave the customer a form that listed the various overdraft options in order of best to 'worst', 'worst' being he ODP discretionary program. They could opt out of it at that time if they wanted too. Something similar would work well for what you are wondering about. It tells them about the other options, and offers an opt out for your automated program.
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You will never see what's inside of me - Five Finger Death Punch

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#1567825 - 06/21/11 03:25 PM Re: Overdraft Guidance [Re: RR Joker]
ahkcompliance Online
Diamond Poster

Registered: 09/10/08
Posts: 1773
Loc: Midwest
On our overdraft brochure, we do discuss all alternatives. We thought about providing something else to customers after they have had XX number of overdrafts.

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#1568175 - 06/22/11 11:37 AM Re: Overdraft Guidance [Re: donnac]
complofcr Offline
100 Club

Registered: 04/08/10
Posts: 132
Loc: SE USA
Originally Posted By: donnac
John - I have a follow-up question to your caveat:

CAVEAT: As soon as you have a customer realize that a cap applies (and it won't take long if you have some "frequent flyers" in your program), they might get the idea they'll get coverage for no fee. And they'd be correct, if that's how you operate your program. But many banks, I imagine, will be starting to return checks unpaid after the daily cap is reached (as is their right). That may prove a surprise to customers if they've not had a check bounced in a while.

QUESTION: Do you think banks will start returning the items & charging the NSF fee since the NSF fees aren't considered OD fees? This way banks will still be earning the income, just not by the customer going into debt.

Thanks.


Can we return checks after the daily limit if there is still room on their ODP limit? For instance, we have an account with 10 items presented and an ODP limit of $400. We pay the first 6 checks and the account is overdrawn a total of $300 including the 6 OD fees. Can we return the last 4 items even though they still have $100 of their ODP limit available?

Thanks!

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#1568180 - 06/22/11 11:43 AM Re: Overdraft Guidance [Re: complofcr]
John Burnett Online
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Registered: 10/27/00
Posts: 30531
Loc: Cape Cod
I'm going to assume that your ODP is discretionary. That is, the bank reserves the right to pay or return items at its discretion. If it's not discretionary, you're dealing with a formal line of credit subject to Regulation Z, and you'd be obliged to pay items up to the credit limit. (And the guidance would not be an issue in the first place.)

Since your program is discretionary, there is no commitment to pay items to the available limit.

I certainly hope your bank has made it clear in its program descriptions, marketing materials, etc., that payment of items is discretionary. Otherwise, you could have UDAP concerns on top of everything else.
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John S Burnett
BankersOnline.com

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#1568267 - 06/22/11 12:57 PM Re: Overdraft Guidance [Re: John Burnett]
complofcr Offline
100 Club

Registered: 04/08/10
Posts: 132
Loc: SE USA
It's not set up as a line of credit. It's an automatic limit set on the deposit account. I just looked at our brochure and it does say it "is a discretionary overdraft service" and our policy on the back of the brochure says that "we may approve your overdraft items". Thanks for pointing that out. I had not thought of it that way.

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#1570602 - 06/27/11 04:19 PM Re: Overdraft Guidance [Re: complofcr]
*W*W* Offline
Platinum Poster

Registered: 02/10/10
Posts: 679
I'm at an FDIC bank, 2 questions:

1. I'm applying a daily cap on overdraft fees and a diminimus amount to our automated and our ad hoc programs. Do I need to notify our customers of the daily cap and diminimus amount?

2. Should my new accounts disclosure describe our automated program and our ad hoc program?
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Opinions expressed are my own and do not reflect the views of my employer.

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#1571534 - 06/29/11 12:42 PM Re: Overdraft Guidance [Re: *W*W*]
John Burnett Online
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Registered: 10/27/00
Posts: 30531
Loc: Cape Cod
1. No need to notify existing customers because it falls under Reg DD and it's a change that's favorable to the customer. I do think you need to mention the de minimis overdraft when describing in your account disclosures the circumstances under which an overdraft fee may be imposed [Reg DD 230.4(b)(4)]

2. I'd keep this information separate and deliver it at new account time (later, if you don't consider new accounts for overdrafts until after a probationary period).
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John S Burnett
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#1571819 - 06/29/11 04:18 PM Re: Overdraft Guidance [Re: John Burnett]
Tryin-2-Comply Offline
100 Club

Registered: 04/11/03
Posts: 197
Loc: Hills of TN
Anyone rearranging their payment order? I've been up and down on this and management has decided not to change payment order. We pay largest to smallest. We are adding a "payment order of items" to our deposit agreement.

What are others doing?

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#1571918 - 06/29/11 06:40 PM Re: Overdraft Guidance [Re: Tryin-2-Comply]
dcl1963 Offline
100 Club

Registered: 02/28/06
Posts: 172
Loc: LA
Looks like we will stay largest to smallest as well. Possibly "must pay" items first large to small, then checks, large to small. We currently disclose the largest to smallest as our payment order. Honestly still not 100% certain...
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In God we trust, all others pay cash. . . Jean Shepherd

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#1571969 - 06/29/11 11:08 PM Re: Overdraft Guidance [Re: dcl1963]
Dani York, CRCM Online
Power Poster

Registered: 04/13/05
Posts: 3271
Loc: TN
Your payment order is up to the bank so long as it is neutral and not in an effort to maximize overdraft fees. You need to be able to defend your business reasons for the order your bank chooses, and those reasons should not have anything to do with fee income.

Our posting order is low to high within transaction types, ie low to high cashed checks and ATM trans, then low to high force pay items (ACH, POS, etc), then low to high other ACH, then low to high checks.
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I can't herd the cats anymore, so I just set up the electric fences and let them fry when they stray out of bounds.

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