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#80681 - 05/15/03 08:11 PM Bounce Proctection (Overdraft Protection)
Anonymous
Unregistered

I thought I read something recently that led me to believe that overdraft protection plans are getting increased government scrutiny. Am I just thinking about Reg Z commentary? Am I imagining this? If not, can someone give me a link to a recent article on this. I think I read it in the last week or so, but cannot find anything.

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#80682 - 05/15/03 09:51 PM Re: Bounce Proctection (Overdraft Protection)
Lestie G Offline

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Do a search under overdraft protection, bounce protection, etc. There have been many threads on this forum, with good information in them in the last few months.
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#80683 - 05/16/03 12:41 AM Re: Bounce Proctection (Overdraft Protection)
Anonymous
Unregistered

No, no, no. I don't want information from months ago. I have probably read any threads you are talking about. I am thinking about something that was very recent--maybe from the FTC??? Maybe it was a nationally distributed newspaper article. Oh well, thanks for trying Lestie!

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#80684 - 05/16/03 04:40 AM Re: Bounce Proctection (Overdraft Protection)
Princess Romeo Offline

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The latest ABA Compliance magazine (or was it the general ABA magazine) had a number of articles on the pros and cons of "Bounce Protection."

IMHO - the bottom line is HOW you market the product.

If you are aggressive and ENCOURAGE your customers to write NSF checks so that you can charge them $25-$30 per check, do splashy statement stuffers that highlight the benefits, and if you include the amount of the "bounce protection" in their balance when they go to the ATM, then you are asking for the regulators and the activist groups to pin you up as the next poster child for predatory "pay day" style lending whose only goal is to suck up those non-interest fee charges from the most vulnerable of your customer base.

IF ON THE OTHER HAND, you have a low-key approach - for instance when you pay a check, you send out a notice along the lines of "We understand that mistakes can happen, and perhaps you were not aware of the balance in your account, but since you are a valued customer we honored the check by overdrawing your account. We charged you the same $29 fee to overdraw your account as we would have charged to bounce your check, but this saved any embarrasment or addtional charges with the party to whom you wrote your check. Please make immediate arrangements to deposit funds to your account to repay the overdraft.

What would be nice then is to have escalating messages on the notices that would encourage the customer to seek credit counseling if they are experiencing financial difficulty.

Finally, IMHO, you should designate a portion of the income from this program to donate to legitimate non-profit credit counseling agenicies, or a home owner eduction program, or any other CRA-type program to benefit low/mod-income people.

Think of it as a "sin tax" to fund preventive programs.
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#80685 - 05/16/03 12:55 PM Re: Bounce Proctection (Overdraft Protection)
rlcarey Online
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Bonnie,

When are you going to run for Congressperson? Sounds like you have a jump on new legislation regarding this product
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#80686 - 05/16/03 02:52 PM Re: Bounce Proctection (Overdraft Protection)
gone Offline
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I have an editorial from the April issue of the ABA Banking Journal. It references a cover story on page 32.
Another article gives banks tips for offering the product. These aren't technical, but a good starting point.

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#80687 - 05/16/03 03:10 PM Re: Bounce Proctection (Overdraft Protection)
campste Offline
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Posts: 145
LA
So, I guess its better to bounce the check back to the merchant and the customer gets charged another $30 and now faces worthless check charges by the DA. I guess you're right the service is to blame. Give me a break!!

The banking industry is the most heavily regulated business in the world and will continue to be as long as grass grows and water flows.

Opinions expressed here far from legal no matter how much common sense it makes.

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#80688 - 05/16/03 07:17 PM Re: Bounce Proctection (Overdraft Protection)
Princess Romeo Offline

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My biggest fear in all of this is when the dust finally settles, we may wind up with legislation that will put ANY overdraft into a Reg B and Reg Z regulated transaction.

In other words, the "Bounce Protection" programs would not only be affected, but any DISCRETIONARY overdraft that a bank may want to do will wind up in the cross-hairs of the overzealous.

I truly think that banks need to join up and promote the SOFT PEDDLE approach (complete with some side benefit to low/mod credit counseling - yes my CRA hat is never very far away....) and really lobby about the hardships everyone will face if banks are no longer allowed to overdraw a person's account.

I can already picture the widow with 3 kids who gets denied the proceeds of her husband's life insurance policy because the last check sent in for the premium got bounced by the bank because it would have overdrawn the account by one dollar, and federal or state law prohibited the bank from paying the check. Can you picture the headlines on that one?
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Regulations are a poor substitute for ethics.
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#80689 - 05/16/03 07:21 PM Re: Bounce Proctection (Overdraft Protection)
Princess Romeo Offline

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I forgot to add that, IMHO, a Bounce Protection program that is set up along pre-determined criteria such as the existence of Direct Deposit of payroll or benefits, a regular patter of deposits, etc., is actually LESS likely to infringe on Reg B concerns than an arbitrary payment of Overdraft based on individual account officer review.

That's one reason I really fear the imposition of Reg B standards and notices for any bank that would like to continue paying Overdrafts. I cannot even imagine the nightmare and bottleneck that would create.
_________________________
CRCM,CAMS
Regulations are a poor substitute for ethics.
Just sayin'

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#80690 - 05/17/03 05:43 PM Re: Bounce Proctection (Overdraft Protection)
Andy_Z Offline
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Quote:

That's one reason I really fear the imposition of Reg B standards and notices for any bank that would like to continue paying Overdrafts.




Under 202.3(c) incidental credit (which should include most ODPs) is exempted from notifications under 202.9.

Certainly discriminatory practices are applicable and I agree that it should not be an issue based on general criteria such as direct deposit, acceptable balances, etc. unless deposit production was targeted to avoid protected classes.
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#80691 - 06/02/03 07:08 PM Re: Bounce Proctection (Overdraft Protection)
zaibatsu Offline
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Check out the May 20th American Banker Community Banking Cover Story. "Bank Overdraft Programs Rankle Consumer Groups."
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#80692 - 06/30/03 02:54 PM Re: Bounce Proctection (Overdraft Protection)
Anonymous
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would denial of an overdraft protection on an account require an adverse action notice to be sent to the customer. OUr statement stuffer concerning this product encouraged customers to apply for the service.

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#80693 - 06/30/03 03:08 PM Re: Bounce Proctection (Overdraft Protection)
rlcarey Online
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If you are talking about the denial of an advance under a prearranged written credit plan, an adverse action notice would be required.
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#80694 - 06/30/03 03:37 PM Re: Bounce Proctection (Overdraft Protection)
Andy_Z Offline
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If you mean you did a credit check, ChexSystems, etc. and decided not to provide the service an FCRA notice would be required.

As Randy noted, if it is a true credit product, a Reg. B AAN would be needed as well.
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My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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