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#1760572 - 11/26/12 02:45 PM Continuous overdraft fees
violet Offline
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violet
Joined: Aug 2012
Posts: 31
Does anyone have any thoughts on re-instituting a fee for continuous overdrafts after the fee was discontinued a few years ago when we began a courtesy overdraft program? Will the examiners (FDIC) question it / look badly upon it?

Thanks.

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#1760610 - 11/26/12 03:51 PM Re: Continuous overdraft fees violet
JobSecurity Offline
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Examiners are still scrutinizing overdrafts. I would stay away from establishing it again.

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#1760617 - 11/26/12 04:05 PM Re: Continuous overdraft fees violet
BrianC Offline
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Also, the FDIC considers EACH fee to count towards the 6 "occurances" before you must reach out to your customer to council them about their account. So one overdraft fee plus 5 days of continous fees and you're at 6 in one week.
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#1760634 - 11/26/12 04:29 PM Re: Continuous overdraft fees violet
ahkcompliance Offline
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I agree, examiners are looking at overdraft programs with a fine tooth comb. We just had an FDIC exam and they wanted to see several examples where we charged fees for paid items, returned items, etc.

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#1760713 - 11/26/12 06:53 PM Re: Continuous overdraft fees violet
John Burnett Offline
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I will just add my voice to those discouraging you from instituting (or reinstituting) a continuing fee. Besides the problem that Brian has already pointed out, there have been some significant CMPs and settlements involving overdrafts and continuing fees. One particularly troubling one was issued in 2010 to a bank that was allegedly piling on the continuing overdraft fees to the point that many customers were simply unable to cure their overdraft status by depositing funds, and the bank (again, allegedly) failed to offer any forbearance (such as stopping the fees from accumulating). That may have been an egregious case, but it really gave continuing overdraft fees the "eau de UDAAP."
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#1761815 - 11/28/12 07:08 PM Re: Continuous overdraft fees violet
dg Offline
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We currently have a "continuous overdraft fee", it kicks in after 5 continuous days of being overdrawn. So two questions:
1. Our OD program is an AD Hoc program, where we go in and review, pay and/or charge or return items manually each day. With that, do we need to offer the counseling after the sixth day if we have an ad hoc OD program?
2. Can we charge the continuous OD fee if item that caused the overdraft is an ATM w/d or one time POS item? We did not elect to have any customers opt out. We just don't charge our standard overdraft fee. Because it is and ATM w/d or onetime POS item that caused the OD, can we not charge the continuous fee for these items?

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#1761823 - 11/28/12 07:11 PM Re: Continuous overdraft fees dg
Dani York, CRCM Offline
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Dani York, CRCM
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TN
Originally Posted By: September
1. Our OD program is an AD Hoc program, where we go in and review, pay and/or charge or return items manually each day. With that, do we need to offer the counseling after the sixth day if we have an ad hoc OD program?


If your program is truly ad hoc, then no, you do not have to counsel after the 6th OD occurrance in a rolling 12 month period....BUT it is recommended as a best practice even for ad hoc programs by the FDIC.

Originally Posted By: September
2. Can we charge the continuous OD fee if item that caused the overdraft is an ATM w/d or one time POS item? We did not elect to have any customers opt out. We just don't charge our standard overdraft fee. Because it is and ATM w/d or onetime POS item that caused the OD, can we not charge the continuous fee for these items?


If the customer has not opted in to the authorization and payment of ODs created by ATM and one-time debt card transactions, you can NOT charge ANY OD fee (initial or continuous) for that overdraft.
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#1761843 - 11/28/12 07:23 PM Re: Continuous overdraft fees violet
rlcarey Offline
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And since they don't have an OD program, there is nothing to opt-in to.
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#1761846 - 11/28/12 07:25 PM Re: Continuous overdraft fees violet
dg Offline
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Pacific NW
Ok so what if for example, the overdraft is a combination of a check and a ATM or onetime POS transaction that overdraws the account on the same day and stays overdrawn for the continuous fee to kick in. How does that work? Would it be right to allow it based on the check overdrawing the account?

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#1761853 - 11/28/12 07:29 PM Re: Continuous overdraft fees violet
rlcarey Offline
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Galveston, TX
The required process is explained in Regulation E 17(b) Opt-In Requirement see comment #9 in the commentary.
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#1761870 - 11/28/12 07:58 PM Re: Continuous overdraft fees violet
dg Offline
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Pacific NW
Ok, well how should we back track? Do we owe our customers back continuous OD fees? DO re reimburse now or wait for our regulator to tell us to?

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#1761879 - 11/28/12 08:07 PM Re: Continuous overdraft fees violet
Princess of Power Offline
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Napa, CA
You should never wait for a regulator to tell you

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#1761881 - 11/28/12 08:08 PM Re: Continuous overdraft fees violet
rlcarey Offline
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Galveston, TX
Well, I think that if you have idenitified a violation in which you have charged consumers a fee in violation of the regulations, waiting for the regulators to tell you is not the best approach, unless you are willing to assume that they will tell you in an examination report and not through a publicly released C&D order.
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#1761961 - 11/28/12 09:58 PM Re: Continuous overdraft fees violet
John Burnett Offline
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I'll join the chorus. Do it now, as soon as you have identified the accounts and customers affected and the amounts of the fees to be refunded. If you wait for a regulator to demand it, you may have to send each affected customer a regulator-approved letter of explanation. If you do it on your own, you get to control what gets said in the notice.
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#1762024 - 11/28/12 11:46 PM Re: Continuous overdraft fees violet
dg Offline
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Pacific NW
SO if I'm reading Regulation E 17(b) Opt-In Requirement comment #9 in the commentary correctly. Is it telling me if there is a combination of a ATM or one time POS transaction and a check or ACH item a continuous fee may be charged? So does it not matter which one overdraws the account first the ATM withdrawal or one time POS transaction, the ACH item or the check?

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#1762632 - 11/29/12 11:00 PM Re: Continuous overdraft fees violet
John Burnett Offline
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John Burnett
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Well it does matter, but only affects WHEN you can impose the fee. For example, if your bank imposes a continuous OD fee if an account has been continuously overdrawn for 5 business days, and if the current overdraft balance is attributable to a combination of card transactions and other (check, ACH, etc.) transactions, you must count the business days based on a non-card transaction, not a card transaction.

For example, suppose the account goes OD on 12/3/12 due to a force-pay gas pump POS debit. It goes further OD on 12/5 due to your payment of a $50 check for the customer. No credits are posted, and you imposed a $30 OD fee on 12/5 based on payment of the check. Determine the date on which to start imposing the continuous OD fee based on the 12/5 date, not the 12/3 date.

If the check started the OD on 12/3 and you force-paid the POS item on 12/5, you can base your counting of business days on the date the check was paid (12/3).

There's a series of examples following comment 9 that illustrate how to apply it.
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#1763013 - 11/30/12 07:51 PM Re: Continuous overdraft fees violet
RR Joker Offline
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The Swamp
Maybe I'm missing or misinterpreting this fee...but if by continuous, you mean a daily OD fee, then be sure and check your state usury laws, as this wouldcould constitute interest.
Last edited by RR Joker; 11/30/12 08:48 PM.
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#1763054 - 11/30/12 08:35 PM Re: Continuous overdraft fees violet
rlcarey Offline
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Galveston, TX
"as this would constitute interest"
I'll finish the sentence for you: in some States.
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