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#204762 - 06/25/04 08:52 PM FACT and notice to deposit acct holders?
P*Q Offline

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I just finished reading the final rule on furnishing negative information. I thought originally we would be required to also inform deposit account holders when we reported them to a database such as Chexsystems or others but I see only the words "credit" being used which leads me to believe this notice requirement is only when we're reporting on a loan? Did I miss something?

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#204763 - 06/25/04 09:08 PM Re: FACT and notice to deposit acct holders?
TomS Offline
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That's my understanding as well, that it only applies to credit accounts.
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#204764 - 06/25/04 09:10 PM Re: FACT and notice to deposit acct holders?
beaten blind Offline
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I'm right there with you. I too am confused as to why this would apply to deposit accounts. Credit generally means the extension of debt to be repaid at a later time, in either one or more installments. Since overdrafts are created by the payment of a check as directed by the Uniform Commercial Code and are not considered credit, how would they be under the umbrella of FACTA? I need a little guidence from the expert BOLers. Thanks!

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#204765 - 06/29/04 12:15 PM Re: FACT and notice to deposit acct holders?
P*Q Offline

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Anyone have any insight as to whether we have to provide notice to deposit account holders? I'm thinking no.

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#204766 - 06/29/04 03:20 PM Re: FACT and notice to deposit acct holders?
StevenD Offline
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See this thread FACT Act OD Accts
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#204767 - 06/29/04 06:14 PM Re: FACT and notice to deposit acct holders?
Bear Collector, CRCM Offline
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I believe that we should provide the Notice when turning accounts to Chex - I think this meets the spirit and intent of the regulation. Most people know that they will be turined to a credit bureau if they don't pay their loan as agreed, but few people are aware that such a thing as Chex even exists. I would think that it is even more important on the deposit side to ensure that consumers understand that failing to pay an overdraft could have negative results. I view it as a customer service issue and plan to implement it at my bank.
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#204768 - 06/29/04 10:21 PM Re: FACT and notice to deposit acct holders?
Suzie Offline
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I agree 100% with Bear Collector's logic and will be providing notice to deposit as well as loan customers.

Just wish I knew how that notice would best be delivered!
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#204769 - 06/30/04 01:04 PM Re: FACT and notice to deposit acct holders?
Anonymous
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I know the model language can be included on other forms. However, has anyone seen any guidance as to whether the model language should be separate from other language (for example, a separate paragraph within a letter to the customer) or can the model language be "blended" into an existing letter?

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#204770 - 06/30/04 01:11 PM Re: FACT and notice to deposit acct holders?
Andy_Z Offline
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Because Reg. B defines credit to include the purchasing of services, I could see overdrafts and fees you have charged for the account, and owed to you, as credit. The FCRA uses this definition and that would make them reportable/disclosable.
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#204771 - 06/30/04 05:01 PM Re: FACT and notice to deposit acct holders?
Ted Dreyer Offline
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Quote:

I know the model language can be included on other forms. However, has anyone seen any guidance as to whether the model language should be separate from other language (for example, a separate paragraph within a letter to the customer) or can the model language be "blended" into an existing letter?




The statute (section 217) says that the notice must be "clear and conspicuous".

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#204772 - 07/02/04 04:49 PM Re: FACT and notice to deposit acct holders?
P*Q Offline

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I just noticed that the model language doesn't really fit the deposit account holder situation but I understand we only have the safe harbor is we use that. Is anyone modifying it to fit deposit accounts that are reported to Checksystems and like companies?

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#204773 - 07/08/04 09:14 PM Re: FACT and notice to deposit acct holders?
Queen Mum Offline
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Could we use the term "Credit Reporting Agency" rather than "Credit Bureau"? That would encompass ChexSystems.

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#204774 - 08/04/04 08:38 PM Re: FACT and notice to deposit acct holders?
Dave M_TCA Offline
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Quote:

Could we use the term "Credit Reporting Agency" rather than "Credit Bureau"? That would encompass ChexSystems.



Actually, wouldn't that be "Consumer Reporting Agency"?
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#204775 - 08/06/04 01:13 PM Re: FACT and notice to deposit acct holders?
P*Q Offline

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Yes, Jacob's Dad, I agree with you.

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#204776 - 08/06/04 05:04 PM Re: FACT and notice to deposit acct holders?
TomS Offline
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Quote:

Because Reg. B defines credit to include the purchasing of services, I could see overdrafts and fees you have charged for the account, and owed to you, as credit.



Andy, I respectfully disagree. "Credit" in Reg B is defined as "the right granted by a creditor to an applicant to defer payment of a debt, incur debt and defer its payment, or purchase property or services and defer payment therefor."

First of all, someone who overdraws their account (absent an OD line of credit) is not an applicant. Plus, I don't see how someone who overdraws their account is "purchasing property or services." And finally, when someone overdraws their account, we don't grant them the right to defer payment, we want our money now.

So I don't see how reporting an overdraft to Chexsystems would require the Fact Act notice. Not to say that it's not a good idea to provide the notice anyway as an added incentive to pay the overdraft, but I don't agree that it's required.
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#204777 - 08/06/04 07:29 PM Re: FACT and notice to deposit acct holders?
Andy_Z Offline
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An overdraft balance is a credit, a debt owed to you. When someone is overdrawn, most banks do not demand payment at that time. They provide some prescribed time to pay it back, 2 weeks to 30 days or possibly more.

The recent OD proposal states, "Overdraft protection programs that are not covered by the TILA would generally qualify as incidental credit under Regulation B." This is not a binding part of Reg. B or the FCRA, but it cannot be ignored.

I don't believe this was the initial intent when the FCRA was being revised, but I do believe it is a result of the way it was done. But this is just an opinion. Hopefully final rules will be very clear.
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#204778 - 08/06/04 07:58 PM Re: FACT and notice to deposit acct holders?
BankerMama Offline
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Lee, ChexSystems is a credit reporting agency so I agree that when we report overdrafts to them, we need to give the notice.

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#204779 - 08/06/04 09:13 PM Re: FACT and notice to deposit acct holders?
TomS Offline
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Quote:

Lee, ChexSystems is a credit reporting agency so I agree that when we report overdrafts to them, we need to give the notice.




I believe Chexsystems is considered a consumer reporting agency, not a credit reporting agency.

Andy, I took another look at Reg B, in particular the definition of applicant and the definition of incidental credit. In light of those definitions I think you're right that an overdraft would be considered credit for purposes of the FACT Act. As you say, that may not have been the intent, and hopefully the final rules will clarify.

I will now pull my foot out of my mouth so I can go home.
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#204780 - 08/18/04 02:46 PM Re: FACT and notice to deposit acct holders?
Anonymous
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The FACT Act does not require the negative information notice when deposit accounts are reported to ChexSystems. While an overdraft is an extension of credit, ChexSystems is not a "Consumer reporting agency that compiles and maintains files on consumers on a nationwide basis" as defined in Section 603(p) of the FCRA. Kirchman has an excellent article on this subject under Hot Issues in the compliance section of their website.

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