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#1474351 - 12/01/10 04:43 PM Re: FDIC "Final OD Payment Supervisory Guidance" Sheldon Hendrix
beegee Offline
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Interesting thought that this may not apply to non-FDIC regulated banks..... Anyone heard from the other agencies on their take on the guidance???

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#1474364 - 12/01/10 04:54 PM Re: FDIC "Final OD Payment Supervisory Guidance" beegee
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I've heard rumors that the OCC isn't "blessing" the FDIC's Guidance, but does continue to expect its banks to comply with applicable laws and regulations and the 2005 Interagency Guidance.
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#1474375 - 12/01/10 05:10 PM Re: FDIC "Final OD Payment Supervisory Guidance" John Burnett
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Ditto what John said.
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#1474527 - 12/01/10 06:52 PM Re: FDIC "Final OD Payment Supervisory Guidance" Sheldon Hendrix
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Gee, if I was writing an article in an attempt to protect consumers from overdrafts I would illustrate how expensive they are, how it's a lousy way to borrow money, how to avoid them, what questions you need to ask your bank... I wouldn't use a publication like this to break my own arm patting myself on the back for issuing "guidance." Consumers don't care and that information is of no help to them, unless of course the FDIC plans to point out that only the banks they supervise are going to be subject to the guidance.

The point was made in a private forum that the FDIC may just be posturing to save some of its turf when the new consumer protection agency starts to flex its muscles; e.g. "We really protected consumers while those other agencies just sat on their hands!" That's just cynical enough that I think it's credible.
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#1475933 - 12/03/10 05:40 PM Re: FDIC "Final OD Payment Supervisory Guidance" Elwood P. Dowd
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I think it should be the number of times a fee was assessed, which has flaws but directly address the FDIC's issue.

Also, the monitoring is going to be a bear. I know the rule does not read this way, but it would be so much easier to do an annual direct mail to all customers regarding the dangers of ODP and what their alternatives are. Otherwise, I can start tracking in July, send a customer a letter the very next week, and then what start the clock over and send them their next letter in August or whenever? It seems very flawed.

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#1476047 - 12/03/10 07:40 PM Re: FDIC "Final OD Payment Supervisory Guidance" Random
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Quote:
I think it should be the number of times a fee was assessed, which has flaws but directly address the FDIC's issue.


Your interpretation is as good as any.

None of us will know for certain what's "right" unitl a field examiner tells you. If you and Soccer Mom Queen has the same examiner, you may get the same interpretation. If you don't, you might not.

Note, if you cap daily fees, your method will affect the time when your counseling responsibilities kick in.

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#1476199 - 12/03/10 11:28 PM Re: FDIC "Final OD Payment Supervisory Guidance" Elwood P. Dowd
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Originally Posted By: Ken_Pegasus
Ad hoc overdraft payments typically involve irregular and infrequent occasions on which a bank employee exercises discretion in a specific instance about whether to pay an item or not, as a customer accommodation and not on a pre-determined or formulaic basis. Such ad hoc activities are not the focus of this guidance.

Regardless, whether the FDIC knows it or not, you and I both know that every bank has customers whose overdrafts are both regular and frequent even though that bank has never promoted overdrafts and continues to make pure case by case "pay or return" decisions. The adverse effects on those consumers are identical to those who bank with more predatory institutions.


When I was grilled about our OD practices two weeks before this was finalized - it wasn't about my auto OD program. I'm sure that's a part of WHY I was grilled -- but our adhoc is a MUCH bigger part of the program and these are the ones that stay OD much longer and incur more fees. We turn off auto OD after a certain period of time. 90% of my auto OD customers never ever touch it. We've never run an ad, we've never posted a banner - and customers aren't even told that there IS auto OD. It's just a way to cut-down on the management daily duties.

That's right. This is big government protecting consumers from themselves.

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#1478547 - 12/09/10 06:43 PM Re: FDIC "Final OD Payment Supervisory Guidance" Always In Training
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The guidance states that it applies to "consumer" accounts, but I see no clear definition. Any thoughts on this?
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#1478811 - 12/09/10 10:09 PM Re: FDIC "Final OD Payment Supervisory Guidance" Still Smiling
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Sometimes the regulators let you run with the commonly-understood definition. Sometimes they impose something different. In this case, I think it's safe to assume the FDIC is referring to an account of a natural person opened primarily for personal, family or household purposes.
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#1514247 - 02/24/11 06:39 PM Re: FDIC "Final OD Payment Supervisory Guidance" John Burnett
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I've read a couple of posts on this but I'm still not sure. Regarding ad hoc ODs. We have a signficant number of consumer that are not part of our ODP program. Many of these OD their accounts regulary and frequently. The decision is done manually and these customers are charged. My thinking is that the spirit of the "guidance" suggests that these consumers are covered. My management disagrees and thinks we may consider doing away with ODP and going back to all "ad hoc". I think that is tempting the devil.

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#1514311 - 02/24/11 07:49 PM Re: FDIC "Final OD Payment Supervisory Guidance" MyKidsMom
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I only have an ad hoc and I'm going to keep doing what I'm doing, which is make a manual decision each time someone hits the NSF report. If I leave the item paid I will charge an NSF fee, and if I return it, I will charge a return fee. (They are both the same price, so paying it will be better for the consumer than returning it.)

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#1514315 - 02/24/11 07:52 PM Re: FDIC "Final OD Payment Supervisory Guidance"
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What about the automatic transfers from savings to checking to cover an overdraft? Does this fall under the definition of "automated overdraft payment program?

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#1514338 - 02/24/11 08:09 PM Re: FDIC "Final OD Payment Supervisory Guidance" lucyc
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Not in my opinion.

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#1514358 - 02/24/11 08:25 PM Re: FDIC "Final OD Payment Supervisory Guidance"
MyKidsMom Offline
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Georgia, how big is your bank?

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#1514526 - 02/25/11 11:14 AM Re: FDIC "Final OD Payment Supervisory Guidance" lucyc
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Quote:
What about the automatic transfers from savings to checking to cover an overdraft? Does this fall under the definition of "automated overdraft payment program?


lvc,

No. That's an overdraft protection plan; it does not create overdrafts.
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#1514527 - 02/25/11 11:20 AM Re: FDIC "Final OD Payment Supervisory Guidance" MyKidsMom
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Quote:
My management disagrees and thinks we may consider doing away with ODP


Txbkr,

SIGH...your promotion of overdraft services has nothing to do with the application of this guidance. It has to do with the way pay or return decisions are made. The only way to avoid this guidance is to go back to the days of yesteryear where every decision was made on an arbitrary and capricious basis and which items got paid and returned depended on who approved the list that day.

Regardless of how ridiculous this guidance is, as you note, that is a profound step backward.

Beyond that, you will still have frequent overdrafters and my opinion is the FDIC will eventually figure that out and its field examiners will encourage you to "help them" even though the guidance purports not to address ad hoc programs.
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#1514535 - 02/25/11 01:35 PM Re: FDIC "Final OD Payment Supervisory Guidance" MyKidsMom
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Originally Posted By: txbkr
Georgia, how big is your bank?


$150 Mil, 2 branches

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#1514786 - 02/25/11 05:37 PM Re: FDIC "Final OD Payment Supervisory Guidance"
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Our compliance group met recently and FDIC examiners were present. When asked about the "6 occurances" and whether this means 6 items or 6 days; they were emphatic that it was 6 items. They did not answer the question about whether the counter resets after 6 or if we have to contact them on every one after 6.

Glad I am NOT FDIC. I am in wait and watch mode.
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#1514838 - 02/25/11 06:37 PM Re: FDIC "Final OD Payment Supervisory Guidance" SMQ, CRCM
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They should be made to work in a bank and handle the overdrafts for a few days.
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#1514899 - 02/25/11 07:20 PM Re: FDIC "Final OD Payment Supervisory Guidance" Kathleen O. Blanchard
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Ken,
Thanks for the clarification. My question had more to do with the "infrequent and irregular piece." I know the promotion has nothing to do with it. We will have consumers that are not in the ODP program that we routinely pay lots of ODs and charge fees. My concern is that the FDIC will criticize that practice because the effect to the consumer is the same. But then, so is is returning their items and charging the same fee.

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#1515090 - 02/25/11 10:12 PM Re: FDIC "Final OD Payment Supervisory Guidance" MyKidsMom
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Keep in mind that the paying of an overdraft is an extension of credit under Regulation B and that your practice of "consumers that are not in the ODP program that we routinely pay lots of ODs" could raise fair lending concerns if not done on a fair and equitable basis across the board.

That is the back door fear that I have for any bank that still processes overdrafts on a "ad hoc" basis.
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#1515171 - 02/27/11 07:41 AM Re: FDIC "Final OD Payment Supervisory Guidance" Sheldon Hendrix
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Well - so much for the guidance not apply to "ad hoc" programs. I have heard from a couple of small FDIC regulated institutions, and the they tell me the examiners are all up-in-their-grill about their "OD Program" even though it consists of the branch manager reviewing the reject report every morning, calling the customer to ask if they will make a deposit to cover, and then deciding whether to pay or not.

Examiners are saying thing like they need to be "disclosing" this to customers, and managing the process in line with the guidance. Exams aren't final yet, so I guess we shall see what happens, but it sounds like common sense just took another flight out the window. frown
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#1515257 - 02/28/11 03:11 PM Re: FDIC "Final OD Payment Supervisory Guidance" Princess Romeo
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They do realize that the easiest approach to this is that the banks simply return every OD items and charge a return item fee and start closing accounts out after the third OD, over the life of the account... like we did years ago, returning a mass of people back to the status of the unbanked and spending even more money in charges and fees as they resort back to using check cashing services and such, right?

They have been told this, correct?
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#1515280 - 02/28/11 03:23 PM Re: FDIC "Final OD Payment Supervisory Guidance" #Just Jay
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You would think? But like most political motivated initiatives - they are somewhat separated from reality.
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#1515666 - 02/28/11 09:57 PM Re: FDIC "Final OD Payment Supervisory Guidance" rlcarey
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JJ, I did tell my EIC that very thing and went on to tell her that some may be prosecuted and jailed when checks get returned. She said, Really??? And I went on to say that free checking will be a goner because banks will have to try to make up the fee some other place.. Really?? She was so surprised. Yes, rlcarey, keeps me awake as well.
Last edited by txbkr; 02/28/11 10:09 PM. Reason: add response to rlcarey
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