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#1937351 - 07/02/14 04:08 PM fWWWmmReg O overdraft
Anonymous
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Related interest business account is frequently overdrawn. A deposit made the next day to cover the previous days overdrawn balance. Is this a Reg O violation?

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#1937386 - 07/02/14 04:56 PM Re: fWWWmmReg O overdraft Anonymous
burke116 Offline
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Joined: Jun 2014
Posts: 529
RVA
(e) Overdrafts. (1) No member bank may pay an overdraft of an executive officer or director of the bank or executive officer or director of its affiliates-3 on an account at the bank, unless the payment of funds is made in accordance with:


-3 This prohibition does not apply to the payment by a member bank of an overdraft of a principal shareholder of the member bank, unless the principal shareholder is also an executive officer or director. This prohibition also does not apply to the payment by a member bank of an overdraft of a related interest of an executive officer, director, or principal shareholder of the member bank or executive officer, director, or principal shareholder of its affiliates.

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#1937397 - 07/02/14 05:15 PM Re: fWWWmmReg O overdraft Anonymous
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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Bear in mind, however, that directors (and exec officers) are expected to manage their accounts, and those of related interests, in an exemplary manner. Frequent overdrafts are not to be expected and this issue should be addressed.
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#1937404 - 07/02/14 05:23 PM Re: fWWWmmReg O overdraft Anonymous
Anonymous
Unregistered

Regarding this information the overdraft(s) are NOT in violation. However it does affect the area of extensions of credit. Specifically prior approval by the BOD is required based on the current total loan commitment balance, correct?

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#1937407 - 07/02/14 05:24 PM Re: fWWWmmReg O overdraft Anonymous
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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Yes, it will be subject to all other rules under Reg O as applicable. Perhaps an actual working capital line is in order.
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#1937422 - 07/02/14 05:51 PM Re: fWWWmmReg O overdraft Anonymous
Anonymous
Unregistered

To be clear would these overdrafts be considered an extension of credit? (End of day balance is neg, deposit is made asap the next morning)

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#1937444 - 07/02/14 06:28 PM Re: fWWWmmReg O overdraft Anonymous
rlcarey Offline
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rlcarey
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Galveston, TX
If they are covered before your return deadline, maybe no or maybe yes, depending on how your regulator looks at it.

But as Kathleen indicated:

1. This is no way to run a business.

2. This is especially no way to run a business when the business is a related interest to an insider of the bank.

Stop this now before things go from bad to worse.

I also assume that you normally allow any business to do this at your bank, because if not and they deem this a credit extension, not only do you have preapproval issues, you have favorable terms problems also.
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#1937450 - 07/02/14 06:34 PM Re: fWWWmmReg O overdraft Anonymous
Anonymous
Unregistered

thank you, I appreciate all of your input.

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#1986256 - 01/05/15 04:16 PM Re: fWWWmmReg O overdraft Anonymous
bstritecky Offline
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Joined: Feb 2005
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We had a director overdraw their account by $2000. the bank paid it and charged the fee. I'm saying we have a Regulation O violation - any agree or disagree?

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#1986292 - 01/05/15 05:22 PM Re: fWWWmmReg O overdraft Anonymous
BrianC Offline
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BrianC
Joined: Nov 2004
Posts: 6,011
Illinois
Agree unless the overdraft was covered by a line of credit or a transfer from another deposit account under a written agreement.

(e) Overdrafts. (1) No member bank may pay an overdraft of an executive officer or director of the bank or executive officer or director of its affiliates3 on an account at the bank, unless the payment of funds is made in accordance with:

(i) A written, preauthorized, interest-bearing extension of credit plan that specifies a method of repayment; or

(ii) A written, preauthorized transfer of funds from another account of the account holder at the bank.

(2) The prohibition in paragraph (e)(1) of this section does not apply to payment of inadvertent overdrafts on an account in an aggregate amount of $1,000 or less, provided:

(i) The account is not overdrawn for more than 5 business days; and

(ii) The member bank charges the executive officer or director the same fee charged any other customer of the bank in similar circumstances.
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#1995015 - 02/10/15 08:27 PM Re: fWWWmmReg O overdraft Anonymous
bstritecky Offline
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Thanks!

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#2014892 - 05/19/15 02:10 PM Re: fWWWmmReg O overdraft Anonymous
morirse de risa Offline
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Joined: Feb 2009
Posts: 238
Midwest
Say you have a Regulation O violation as Becky S. mentions in this thread. Is there any way to fix this violation in the eyes of the regulator, i.e. report it to the BOD?

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#2014900 - 05/19/15 02:22 PM Re: fWWWmmReg O overdraft Anonymous
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,277
You will have to show that the bank has taken steps to prevent this problem from occurring again.
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#2014909 - 05/19/15 02:40 PM Re: fWWWmmReg O overdraft Anonymous
morirse de risa Offline
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Joined: Feb 2009
Posts: 238
Midwest
OK thanks!

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#2014913 - 05/19/15 02:48 PM Re: fWWWmmReg O overdraft Anonymous
Rocky P Offline
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Posts: 7,232
Florida
The FRB had a paper on director's overdrafts that you may want to read. Although it's from 1996, I believe it has not been superseded.
http://www.federalreserve.gov/boarddocs/legalint/FederalReserveAct/1996/199612062/
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