I'm looking for opinions as to what others do about accounts that excessively overdraft - I'm talking those that may overdraft 40+ times in a 12 month period. We have a number of customers that aren't necessarily risky, but are just "chronic overdrafters" and bad at budgeting. We send out the proper notices when they do overdraft, along with a separate notice outlying options in which they can reduce their fees via other services/accts/LOC etc.

We seem to be under the impression that this/was a hot button topic with regulators - therefore some years back we implemented a report where those with 40+ overdrafts in a 12 mo period will be contacted by phone...the responses I reviewed are all similar: "Jim is aware of the charges and will try not to O/D as much".

I'm open to input! I'm interested in your thoughts, or what you might do at your bank.

Take a look at the FDIC's FIL-81-2010. "Final Overdraft Payment Supervisory Guidance," and the FAQ issued in April 2011 concerning that Guidance. That's where you will find the "expectation" of the FDIC that is described as "meaningful and effective follow-up" to excessive overdrafts, and it's probably the genesis of your bank's procedures.

There is always the choice to close out accounts like the ones you describe. Lots of banks take that path, perhaps to avoid regulator criticism. Other banks leave the accounts open, usually keeping an eye on them to avoid losses -- to the bank -- perhaps feeling that if the customer appears not to care how much money they lose in fees, it's not the bank's problem (not to mention it's a big chunk of income -- especially in the low rate, no spread times we are in -- for the bank.

I live in a summer resort area, and worked at a bank here for over 30 years. We had one branch manager who regularly let several summer businesses' accounts run overdrawn for much of the summer season, each business making deposits periodically enough to cover those overdrafts, albeit after they had been overdrawn for several days. One Labor Day weekend, we had a major storm, and the tourists pulled up and headed home the Thursday before. The town where the bank branch was located seemed as desolate as in mid-winter, and lots of businesses had a miserable weekend saleswise. A couple of those chronically overdraft businesses closed up for the season, leaving their negative balances in the dust. The mood was grim at the next managers' meeting, to say the least. Overdrafts were managed differently thereafter.

If you have abusers and you continue to pay overdrafts for them while they rack up these fees, then I think the regulator's gloves would come off. The easiest way to get this to stop is to tell the customer that you are no longer going to pay any overdraft checks. If they want to continue to rack up return check charges, that is pretty much on them, but that usually ends the issue.

Amen to that! ^^^

Thank you both.
I guess that answers why we do what we do. I think we were hoping that we could cut out the "phone call" part, but it appears that was specifically addressed in that FAQ. It does seem ineffective, but at least it keeps the examiners off our backs.

but at least it keeps the examiners off our backs.

Until the next time they actually look at it

We have been looked at by the examiners, and apparently didn't raise issues. We're currently doing additional notices at 6 ODs, along with further followup phone calls when they continue.

But I am curious - is there anything you feel we should do additionally or differently?

Like I previous said - set a limit and then quit paying the checks.

i have seen recent articles about banks not charging OD fees for ODs under $x dollars (mostly seems line $3-$5 range, but saw one as high as the OF fee of $36). there comes a point when if you are having to make decisions about how to handle a small number of accounts because of regulatory concerns, then i would seriously consider closing those accounts. does it really makes sense for your bank to spend time on this customer? sure, you can look at the fee income you generate because of their OD (and if you charged $30 per OD, that is $1200 a year, a good amount), but how is that offset against time and monitoring and expense of staff?