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#1497886 - 01/20/11 07:24 PM FDIC Guidance on OD programs
Aggs Offline
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Aggs
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Hoosier Country
I'm trying to gather research on how other banks are going about implementing the FDIC guidance regarding overdrafts. I already got some information from contacts I have at other banks, but I thought I would ask here as well.

Mostly, it's pertaining to these items:

Monitor programs for excessive or chronic customer use, and if a customer overdraws his or her account on more than six occasions where a fee is charged in a rolling twelve month period, undertake meaningful and effective follow-up action, including, for example:

 Contacting the customer (e.g., in person or via telephone) to discuss less costly alternatives to the automated overdraft payment program such as a linked savings account, a more reasonably priced line of credit consistent with safe and sound
banking practices, or a safe and affordable small-dollar loan; and

 Giving the customer a reasonable opportunity to decide whether to continue fee-based overdraft coverage or choose another available alternative.

============================================================

My questions:

- How are you defining "occassions"? Number of fees, number of transactions, number of days?

- In-person and via telephone are examples of ways to contact the customer. Would mailing a letter/notice also be acceptable? The other banks I've talked to indicated that they're planning on doing letters only and other contact would be left up to the branch employees.

- I know some other banks have already limited the number of fees they will charge in a given day. Can any of you provide examples of how you are limiting, or have already limited, OD fees? We are looking at doing something (limit-wise) but would like to get an idea of where others are on this.

****EDITED TO ADD: I am not asking how much you're charging or thinking about charging. I'm mostly asking if you're going to consider having a limit on daily fees or going to a more "fee corresponds to amount of OD" type of thing.***

Thank you!
Last edited by Aggs; 01/20/11 09:00 PM. Reason: Clarify
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#1497907 - 01/20/11 07:42 PM Re: FDIC Guidance on OD programs Aggs
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To answer the first question, we will be relying on our core processor. I beleive they will look at the # of times a fee is assessed and provide us a report. As of now, they will not be providing notices to us that will come from teh system automatically, but it is coming.
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#1497966 - 01/20/11 08:24 PM Re: FDIC Guidance on OD programs Compliance Chick
HappyGilmore Offline
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Pulling people out of the ditc...
in our book, an occasion is an OD occurrence...

letter notification only (which will likely be thrown away without the customer reading, leading to more OD fees)

I am unable to provide pricing information as I am a national bank and the OCC forbids me from doing this (but if you send me a PM and word it differently, i may be able to provide assistance)
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#1498268 - 01/21/11 02:21 PM Re: FDIC Guidance on OD programs HappyGilmore
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Aggs, I feel your pain, sometimes it is so hard to see the forest through the trees...
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#1498365 - 01/21/11 03:08 PM Re: FDIC Guidance on OD programs Aggs
Elwood P. Dowd Offline
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Next to Harvey
Occasions - My read is that it is the number of fees; i.e. if you voluntarily limited the number of fees per day, those "extra" NSF items don't count toward the six. What I'm pondering is how to deal with the customer whose six fees in August will show up on every report for the following eleven months. Do we send him a new notice every month? How do you spell harassment?

Customer notifications - I suggest you have a form letter. (By the way, this little missive could be classified as promoting overdrafts and trigger Regulation DD's additional disclosure requirements.)

If you are going to call customers, I suggest the employee work from a script. My premise is that all customers should get the same information. About the phone calls, I would not. Your employees do not get paid enough to walk into a buzz saw...

The part I like the most about these cute little notices is that they must be "meaningful" and "effective." How can either of those things be measured? Is it really possible that these inside the Beltway boobs actually believe this will affect consumer behavior?

Limitations on fees - First, note that it does not say limitation on "overdraft" fees. They may think you should limit "return item" fees too. I would not. While six paid checks create one overdraft, six return items generate six units of work and I want to be paid for each of them.

Your only valid source of reassurance on your conclusions will come from the examiner who will visit your institution. As your questions indicate, there are many things that are unclear. The facts that 1) the FDIC took less than 6 weeks after the comment period ended to consider 900 comment letters and 2)succesfully ignored most of the observations made in those letters suggests that leaving banks to the individual discretion of their examiners was the result sought.
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#1505033 - 02/04/11 02:54 AM Re: FDIC Guidance on OD programs Elwood P. Dowd
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I’m not so sure what asterisk #5 “If a fee is charged, such fee should be reasonable and proportional to the amount of the original transaction.” means. Can anyone provide any guidance, and/or what is reasonable and proportional?

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#1505070 - 02/04/11 01:51 PM Re: FDIC Guidance on OD programs Compliance Poster
John Burnett Offline
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Cape Cod
It's suggesting that if you do impose OD fees on even small OD transactions (like that $2.95 latté), you do so on a tiered basis, so that, perhaps, your fee is $5 for transactions up to $25, $10 for transactions from $25.01 to $50, and $39 for larger transactions.

Or you could try mimicking the Reg Z credit card fee restrictions and say that your OD fee is the lesser of $39 or the transaction amount.

Other than that, the Guidance provides no "guidance" on how to interpret that provision, so it's one of those deals where you try something and see if the FDIC accepts it. You might consider running any proposed changes by your lead examiner to see if it passes his or her laugh test.
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