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#1533451 - 04/08/11 06:03 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
Kathleen O. Blanchard
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Georgia Plum
Unregistered
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KB, no limit on those if you use a debit card!
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#1533462 - 04/08/11 06:10 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
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100 Club
Joined: Mar 2006
Posts: 140
CA
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Our customers don't seem to care how much they pay for their coffee - I'm starting to understand why the government is getting so involved...they really do need some counseling.
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#1533476 - 04/08/11 06:28 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
fnbgal
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Member
Joined: Jun 2008
Posts: 83
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Look at the top users of the program and their fees, and consider if it would be embarassing if that information hit the newspaper...
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#1533489 - 04/08/11 06:43 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
fnbgal
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Platinum Poster
Joined: May 2010
Posts: 958
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So, what if your customer is overdrawn $20.00 and three more transactions come through that total less than $10.00 - $3.50, 2.00 & $4.00 - will you charge them $90 for those three items?
We're finding out this happens more often than we would ever have thought. And we're going through an audit right now and the auditor is going to strongly recommend that we charge fees based on transaction amount. And I think I would have to agree. I would disagree with the auditor. The vast majority of small dollar transactions are through debit cards. I'd say the chances are slim to none that customers have numerous $2.00 and $3.00 checks and ACHs. With that said, in order for a customer to be charged a fee for their debit purchase, they would have to take the extra step of opt'ing IN. Furthermore, a de minimis is provided if the account is overdrawn within $10.00. I would say those are some pretty strong consumer protections put in place, where the only way for someone like you said to have that situation would be someone already being overdrawn and also previously made the decision they want their debit card to overdraw their account.
Last edited by Bob The Banker; 04/08/11 06:44 PM.
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#1542132 - 04/27/11 07:55 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
Bob The Banker
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Diamond Poster
Joined: May 2007
Posts: 1,245
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Does the new guidance apply even if we don't charge the customer the nsf fee?
We are considering going back to the "ad hoc" way and terminating our ODP program, but we want to give the customers an OD limit so they can use it at POS or ATM.
Will the new OD guidance apply if we give the OD limit but not charge the NSF fees up to the limit we provided the customer?
thanks,
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#1542155 - 04/27/11 08:12 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
banker-12
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10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
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What you describe would be an automated overdraft payment program to the extent that you'd be setting a limit that would be managed by your card authorization process. Whether or not you charge a fee would not affect the nature of the program, IMO.
But when counting "occasions" under the "6-in-12" guidance element, those transactions for which you don't charge a fee would not count as occasions.
But consider what you'd be doing -- your customer with $50 in his account could withdraw $100 at an ATM or with a POS purchase, but if a check gets presented, you'd make an ad hoc decision to pay or return. As a customer, that doesn't make sense to me.
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John S. Burnett BankersOnline.com Fighting for Compliance since 1976 Bankers' Threads User #8
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#1542186 - 04/27/11 08:37 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
John Burnett
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Gold Star
Joined: Jul 2008
Posts: 275
DFW, Texas
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Can I throw a question in here...are most banks creating written policy and procedures for their overdraft payment programs? The last FIL I read said the FDIC expects it. Does anyone have one they would like to share?
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#1542227 - 04/27/11 09:32 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
brainOverload
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Member
Joined: Jun 2008
Posts: 83
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I disagree with John on the applicablity of the guidance. The focus of the guidance is fee transactions. I think that the guidance would not apply in your scenario since you dont charge a fee for those overdrafts.. Your program is AD-HOC and as a courtesy you allow customers a limit for their Cards... This seems like a good thing for the customers. There are two areas that I think you should consider with that program: 1. Would be your posting order, and how that would affect your fee income. Your posting order would need to be well supported and not designed to maximize fees. 2. What are the risks to the bank under the program. What limits would you set for the cards?
BrainOverload - Yes, I think you should have P&P. Examiners will surely be asking for it. As you consider your P&P, remember to cover any descretionary decisions and provide some guidelines that your staff will use. Our examiners went out to the branches and asked a-lot of questions on that decision process, surely looking at the fairness implications...you should make sure your guidelines focus on the risk of loss for any descretionary areas...
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THANK YOU GOVERNMENT: “If I seem unduly clear to you, you must have misunderstood what I said” - A. Greenspan
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#1542231 - 04/27/11 09:40 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
brainOverload
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Diamond Poster
Joined: May 2007
Posts: 1,245
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So we still need to implement policies and procedures even though most of the procedures we would need to implement under the guidance involve around fees, for example, like the monitoring of more tha "6-in-12" as you stated above, "limiting the number of transactions subject to a fee", "de minimis amount", "alerting customers when risk of generating a fee", etc.
The OD limit would mostly be offered to those customers we never charged under the ODP, like employees.
thanks,
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#1542240 - 04/27/11 09:56 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
banker-12
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Diamond Poster
Joined: May 2007
Posts: 1,245
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okay, so the guidance will not apply in my case.
Is daily interest considered a fee?
thanks,
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#1542262 - 04/27/11 10:57 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
banker-12
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Member
Joined: Jun 2008
Posts: 83
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daily interest on what?
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THANK YOU GOVERNMENT: “If I seem unduly clear to you, you must have misunderstood what I said” - A. Greenspan
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#1542305 - 04/28/11 11:29 AM
Re: FDIC "Final OD Payment Supervisory Guidance"
banker-12
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10K Club
Joined: Aug 2001
Posts: 21,939
Next to Harvey
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As John said, the guidance applies because your payment of some overdrafts in some circumstances is automatic, but the lack of a fee simply means there is no trigger for the portion that requires customer counseling.
Interest charged on an overdraft would be aggregated into overdraft fees and would be included in your periodic statement totals. If you charge the interest amount to the account daily, there is no question it would be classified as a fee "occasion" just as a $3 per day fee would be.
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#1542348 - 04/28/11 12:53 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
Elwood P. Dowd
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Platinum Poster
Joined: May 2010
Posts: 958
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Interest charged on an overdraft would be aggregated into overdraft fees and would be included in your periodic statement totals. If you charge the interest amount to the account daily, there is no question it would be classified as a fee "occasion" just as a $3 per day fee would be. Unless the poster is referring to a sweep from a personal line, in that case the guidance doesn't even apply.
Last edited by Bob The Banker; 04/28/11 12:54 PM. Reason: typo
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#1542354 - 04/28/11 12:59 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
Bob The Banker
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10K Club
Joined: Aug 2001
Posts: 21,939
Next to Harvey
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If the checking account is backed up by a line of credit and the NSF item is covered by a transfer from that line there will not be an overdraft or any interest paid on an overdraft.
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In this world you must be oh so smart or oh so pleasant. Well, for years I was smart. I recommend pleasant.
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#1542416 - 04/28/11 01:42 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
Elwood P. Dowd
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10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
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Don't forget that significant portions of the guidance will apply even if your bank operates like most did in the 1970s -- no overdraft “program,” no advertising of overdraft payment, strictly ad hoc decisions, etc. FDIC-supervised banks that fit that description would still be expected to comply with applicable laws and regulations, and (from the FAQ) “manage potential reputational, compliance, and litigation risks regarding certain overdraft payment practices, such as check clearing practices designed to maximize overdraft fees.”
In the Guidance itself, the FDIC states that it expects its supervised institutions to “implement effective compliance and risk management systems, policies, and procedures to ensure that institutions manage any overdraft payment programs in accordance with the attached 2005 Joint Guidance on Overdraft Protection Programs2 (Joint Guidance) (FIL-11-2005) and the FRB November 12, 2009 amendments to Regulation E, to avoid harming consumers or creating other compliance, operational, financial, reputational or other risks. As changes are made to overdraft payment programs in response to regulatory developments or to implement additional recommendations, institutions are reminded to ensure that customer communications (e.g., agreements, correspondence, marketing materials, etc.) are updated accordingly, present information accurately and are not misleading.”
The reference to the 2005 guidance would not apply due to the nature of the hypothetical bank program in question.
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John S. Burnett BankersOnline.com Fighting for Compliance since 1976 Bankers' Threads User #8
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#1542486 - 04/28/11 02:43 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
John Burnett
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Diamond Poster
Joined: May 2007
Posts: 1,245
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It's the interest we charge on the overdraft which is charged at the end of the monthly statement cycle and included in the periodic statement total.
So this interest is considered a fee - we won't be able to charge that either if we don't want to do the monitoring and the counseling, correct?
With the exception of the 2005 guidance, the monitoring and counseling, we need to follow the new guidance?
We will follow the FAQ #3 relating to our ad hoc decisions.
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#1542568 - 04/28/11 03:35 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
banker-12
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Georgia Plum
Unregistered
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This is all we are doing as far as a risk assessment/procedures/etc.
Overdraft Risk Assessment
XXXX Bank does not promote overdrafts. Our overdrafts are reviewed daily by the account officer and decisions are made individually on whether to pay an item into overdraft or return the item. These decisions are made by the officers who know the customer. Additionally our overdrafts are also reviewed by the Deposit Operations Manager and the Compliance Officer. If they disagree with any decision being made, they contact the account officer or their supervisor to discuss.
1. Decisions are based on customer relationship and activity against the risk of a customer not funding the account. We will give a courtesy call letting the consumer know that they have items presenting against insufficient funds unless we have a verbal agreement with the customer to forego the call or if we know a customer has made a deposit or has a direct deposit coming in within a day or so. 2. We do not charge an NSF fee for any item that overdraws an account $10.00 or less. 3. We do not charge an NSF fee for any ATM/POS item that overdraws an account. 4. We do not charge daily overdraft fees. 5. Our return fee and our NSF fee are the same amount. There is no monetary incentive to pay an item into overdraft. We feel that paying an item into overdraft rather than returning it is more beneficial to the consumer as they will not incur additional fees from merchants and no arrest warrant can be issued by a merchant. If we have consumers that we feel are writing more and more checks against insufficient balances we typically return the items without charge and start to close the account. If a customer has extenuating circumstances, we do our best to help them with a plan to bring their account current. 6. We post our items in the following manner to ensure we are mitigating risk to the bank as well as ensuring the priority order is not detrimental to the customer from an NSF fee perspective. • We will post all wire transfers, returned deposited items, teller cashed items, internal transfers and ATM/POS transactions first because the money has already been given to the customer or authorized electronically. • We next post all checks presented on the account in check number order. • We next post any ACH transactions from smallest to largest. • We next post any service charges or fees. No NSF fees are ever assessed against fees which cause an overdraft. 7. Our experience shows that we are manually waiving approximately 30% of overdraft fees. 8. We feel we are at very low risk for any reputational damage due to excessive or abusive overdraft fees and that our overdraft processing is fair to the consumer.
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#1542613 - 04/28/11 04:00 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
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Diamond Poster
Joined: Jul 2006
Posts: 1,115
Where the Green Grass Grows
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How/why are you paying ACH items after presentment of checks ? ACH are priority pay, are they not?
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#1542638 - 04/28/11 04:15 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
Always In Training
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Georgia Plum
Unregistered
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Nope. ATMs are priority pay. If we had a way to post checks and ACH at the same time, I would, but we can't.
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#1543046 - 04/28/11 08:16 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
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Gold Star
Joined: Jul 2008
Posts: 275
DFW, Texas
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[quote=Georgia Plum]This is all we are doing as far as a risk assessment/procedures/etc.quote]
Thanks...that help a lot!
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#1545107 - 05/03/11 10:58 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
brainOverload
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Platinum Poster
Joined: Feb 2010
Posts: 835
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We offer an automated overdraft program on certain account types. What method can we use to show new customers affirmatively consented to the automated service when they opened one of those account types? i.e. documented verbal consent, signed consent.....?
We didn't implement a Reg E opt-in program, so that's why I'm asking this question.
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#1545210 - 05/04/11 01:12 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
*W*W*
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10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
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The FDIC doesn't specifically require an opt-in for your program; it encourages you to offer an opt-out. It will be happier to see an opt-in, I imagine, because that means that a smaller number of consumers will have the service, human nature being what it is.
How you document the opt-in (or opt-out) is up to you. Getting written opt-ins from customers is perhaps the simplest method conceptually, and theoretically the easiest to prove. But it is paper and time intensive, and has operational drawbacks (storage and/or image-scanning, records retention management, etc.). If you can incorporate the opt-in (or opt-out) into your signature "card" document, the operational challenges are easier to manage.
Another option is to obtain oral opt-ins or opt-ins online. The online opt-ins can be documented in bits and bytes. Oral opt-in procedures can be documented (and demonstrated for auditors and examiners), and you may decide you want to keep some sort of log for opt-ins received via this channel.
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John S. Burnett BankersOnline.com Fighting for Compliance since 1976 Bankers' Threads User #8
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#1546656 - 05/05/11 05:20 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
John Burnett
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Junior Member
Joined: Jan 2008
Posts: 45
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We are a State Member bank, and our regulator is the Federal Reserve. I found the FDIC Overdraft Payment Program supervisory guidance, but I have not been able to find an FRB guide. Is there one and can someone tell me where to look. Thanks GG
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#1546682 - 05/05/11 05:40 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
gigi2
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10K Club
Joined: Jul 2001
Posts: 84,210
Galveston, TX
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They have not released a new one. The FDIC is a lone wolf.
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#1546711 - 05/05/11 06:02 PM
Re: FDIC "Final OD Payment Supervisory Guidance"
rlcarey
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Member
Joined: Jun 2008
Posts: 83
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For the 2005 guidance, go here http://www.federalreserve.gov/boarddocs/press/bcreg/2005/20050218/attachment.pdf Our contact with the FRB told us that they will be issuing at some time in the future but until then, the FDIC guidance is the best guidance available and that we would be wise to follow-it. She didnt say that they would cite it as law. My take is that if you arent, they might just make your life difficult...remember you cant fight the man...
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THANK YOU GOVERNMENT: “If I seem unduly clear to you, you must have misunderstood what I said” - A. Greenspan
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