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#368438 - 06/06/05 03:39 PM ODP Protection & New Guidance
Compliance Heifa Offline
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Up on the Roof in Texas
Our bank is offering an advertised Overdraft Protection Program. Management would like to charge a lower fee for paying an overdraft than returning an item unpaid. $28.00 for a paid item and $30.00 for unpaid. I believe that we could be criticized for encouraging use of the ODP program at the lower price and this would be a "red flag" for the examiners. Also, shouldn't our senior account (age 55) to qualify have the lowest limit available on the account as the "Free" account because of Reg B issues?

Thanks

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#368439 - 06/07/05 12:49 PM Re: ODP Protection & New Guidance
rlcarey Offline
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How would you justify the fees for the unpaid checks as not being unconscionable? Charging more for a paid check I could understand as you could justify some of the difference as the cost of funds and risk associated with the action. Then again, any price differential between the paid and unpaid check might be deemed interest at the State level. Not an easy question to answer and I would recommend that your legal counsel be actively involved in the discussions.
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#368440 - 06/07/05 04:04 PM Re: ODP Protection & New Guidance
Andy_Z Offline
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One of the issues Texans faced in these comments was the support based on the Tony's Tortilla case. Because the same fee was charged on a returned item as a paid item, it was considered a fee and not a finance charge. This is where Randy's caution comes in because now you may have usury and disclosure considerations.

In your example, you have the inverse scenario and I would agree that consumers would opt-in, not out, to save money on the fee. It would be an encouragement.

And would your position be that it is more costly to return an item than to pay it and risk those funds? Otherwise, the motivation would seem to be that it is to encourage the use of this, and that is not a good thing. Defending that in a class action would be tough and potentially very expensive.
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#368441 - 06/08/05 01:38 PM Re: ODP Protection & New Guidance
LoisLane Offline
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The Tony's Tortilla case?
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#368442 - 06/08/05 03:09 PM Re: ODP Protection & New Guidance
CalifDreamin Offline
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You mention the question of offering the lowest fee on your "Senior" accounts which are offered to customers that are 55+...I've been hearing from other compliance officers and at seminars that examiners are criticizing banks for offering the ODP programs on this account due to the fact that Reg. B defines elderly as 62 and older. I'm hearing that other banks are simply removing that option from those accounts for now. There was a good discussion on this in the threads back in April: ECOA and Automated Overdraft Protection
Last edited by FlamingoGal; 06/08/05 03:18 PM.
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#368443 - 06/09/05 03:24 AM Re: ODP Protection & New Guidance
rlcarey Offline
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See Andy's recap here: Daily Overdraft Fees
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#368444 - 06/09/05 03:06 PM Re: ODP Protection & New Guidance
Anonymous
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Quote:

You mention the question of offering the lowest fee on your "Senior" accounts which are offered to customers that are 55+...I've been hearing from other compliance officers and at seminars that examiners are criticizing banks for offering the ODP programs on this account due to the fact that Reg. B defines elderly as 62 and older. I'm hearing that other banks are simply removing that option from those accounts for now. There was a good discussion on this in the threads back in April: ECOA and Automated Overdraft Protection




We went through a compliance exam at the beginning of April. The examiner said we had a ECOA violation because we offered ODP on our "55+" accounts. We took the position that we didn't have a violation because the OD limit and fees for using the ODP were the same as on our other free accounts. The examiner sent the issue to legal at the Chicago FDIC office who then sent it to Washington, D.C. After what seemed like an eternity, the FDIC's legal team in D.C. said it was not a violation.

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#368445 - 06/09/05 07:56 PM Re: ODP Protection & New Guidance
Andy_Z Offline
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Did the FDIC say it wasn't or did DOJ refuse the referral? It was a month or 2 ago that the FDIC in Chicago said it was a violation. I am wondering which came first and if they're reversing the position I heard them say they were taking.
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#368446 - 06/09/05 08:08 PM Re: ODP Protection & New Guidance
Anonymous
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Quote:

Did the FDIC say it wasn't or did DOJ refuse the referral? It was a month or 2 ago that the FDIC in Chicago said it was a violation. I am wondering which came first and if they're reversing the position I heard them say they were taking.




The way the examiner explained it to us, was that the Chicago FDIC office was actually split on their opinion...some said it was a violation, some said it wasn't. They then sent it on to D.C. to make that call so they could "speak with one voice". The DOJ was the one that actually decided that we didn't have a violation, according to the examiner.

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#368447 - 06/09/05 08:30 PM Re: ODP Protection & New Guidance
RR Joker Offline
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The deeper I get into reading this "guidance"...the more I think ODP needs to be abolished!
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#368448 - 06/09/05 08:40 PM Re: ODP Protection & New Guidance
Anonymous
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In response to Flamingo Gal-she's correct. Our institution had to change ALL our senior accounts that had customers from 55-62 to a different account. And, increased our age limit of senior accounts to 62.

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#368449 - 06/09/05 09:36 PM Re: ODP Protection & New Guidance
Andy_Z Offline
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And if the FDIC stops saying this is a problem, will you change them back?
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#368450 - 06/10/05 01:22 AM Re: ODP Protection & New Guidance
RVFlyboy Offline
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I don't hear that having ODP on Senior Accounts with age less than 62 is a problem. What is a problem is giving accounts in that category a higher ODP limit than in other account types or lower ODP fees than for other account types just based on the account type.

In other words, you can give individual customers in the Senior Club account a higher limit or lower fees based on criteria that are also applied to non-Senior Club accounts. You could give both a Senior Club member and a non-senior regular checking customer both a $500 limit because they deposit at least $1000/mo. for 3 months. And you can give other non-senior regular checking account customers a $400 limit because they don't have deposits of at least $1000/mo. That is not an ECOA violation. But you can't say all of our regular checking accounts get a $400 limit and our Senior Club accounts get a $500 limit. That's an ECOA violation.
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#368451 - 06/10/05 01:52 AM Re: ODP Protection & New Guidance
rlcarey Offline
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Actually with the FDIC is goes deper than that.

If you give your seniors (for example 55 years+) a checking account with no monthly maintenance fees and a $400 ODP limit....

and then...

Give the rest of your customer base a checking account with a $5 a monthly maintenance fee with a $400 ODP limit.....

The FDIC says they can access the same ODP limit for less cost and it is therefore a ECOA violation.

It may have nothing to do with the ODP limits, but the underlying fees in the various checking accounts.
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#368452 - 06/10/05 02:24 PM Re: ODP Protection & New Guidance
Anonymous
Unregistered

Does anyone have sample language they can share with me that you are placing on ATM's? Thanx!

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#368453 - 06/13/05 06:30 PM Re: ODP Protection & New Guidance
Anonymous
Unregistered

"Transactions may be approved that overdraw the account and fees may be incurred."

Will the examiners expect the bank to follow these "best practices" even if we never had an odp program and don't intend to? Ie, it is the bank's responsibility to notify customers who overdraw their accounts that alternative programs are available?

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#368454 - 06/13/05 08:54 PM Re: ODP Protection & New Guidance
Elwood P. Dowd Offline
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If you have never promoted overdrafts to customers, there is no realistic way they can say the Guidelines are applicable to you. The irony lies in the fact that if you wanted to develop a little disclosure and talk about alternatives, it would have to be very precise and not include anything that might "promote" overdrafts. Otherwise, you could end up with a well intentioned disclosure that triggers application of the Reg DD changes in their entirety.

A couple things in the Reg DD changes will affect all banks. The Guidance should not.
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#368455 - 06/13/05 09:11 PM Re: ODP Protection & New Guidance
Anonymous
Unregistered

I intend to sign up for the BOL webinar on ODP on June 20, but was wondering if I could get a little advice beforehand. Best practice #8 - Explain impact of transaction clearing policies.
Is it enough to state:

"Transactions may not be processed in the order in which they occurred. The order in which they are received and processed can affect the total amount of overdraft fees incurred."?

My concern is that actual order in which we process is technical and would definately be confusing to the average consumer.

Thank you.

You can not antagonize and persuade at the same time.
Last edited by John Burnett; 06/15/05 02:19 PM.
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#368456 - 06/13/05 11:56 PM Re: ODP Protection & New Guidance
Elwood P. Dowd Offline
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Only OTS supervised institutions are subject to a direct suggestion that they disclose the order of payment. As you say, it would confuse most people and win hands down as the most worthless piece of information ever disclosed. It has absolutely no value, unless it is to serve as the basis of a complaint against the bank.

There is no model language for the disclosure you mentioned. Here's what I am going to use as an example:

The payments you authorize against your account may not be presented to us in the order in which you authorized them. The order in which they are presented to us may affect the amount of the NSF fees you incur. For example, if your account balance is $102 and you issue two $40 checks, but before they are presented to us you withdraw $100 from an ATM machine, you will have two NSF fees rather than the one you would have incurred if the checks had been presented before the ATM withdrawal.

As I've said before, this is the first time in years that banks have had to work without a net; i.e. model language. Someone fresh out of "examiner school" could say we were both unclear or confusing...
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#368457 - 06/14/05 03:32 AM Re: ODP Protection & New Guidance
Andy_Z Offline
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Quote:

Someone fresh out of "examiner school" could say we were both unclear or confusing...





Huh?

This is info on the 6-20 webinar mentioned above. But note, it is on June 20 not the 21st.
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#368458 - 06/15/05 02:21 PM Re: ODP Protection & New Guidance
John Burnett Offline
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I changed the date in Marcy's post to eliminate any confusion.

But now folks will wonder what Andy was referring to???

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