We offer bounce protection. When we "enroll" an account, we send a letter that states the information about the program in accordance with the ODP best practices. It also mentions the dollar amount of the ODP (typically $500). This is the only place we mention the dollar amount.

With the new Reg DD amendments, would this be considered an advertisement? I initially didn't think so, but now I'm not so sure.

From what I can tell...yes...That's similar to the predicament we are in right now. Totally complicates matters doesn't it!

It certainly does. Maybe we'll get clarification that the initial notification is considered exempt?

We are in a similar situation of trying to figure out how to comply with the best practice of providing the customer with an opt-out without telling them what they are opting-out of, because the minute we do, it's an advertisement!

The regulation specifically states that communicating in any way with your customer about your ODP (except for the specifically-exempted situations) is considered promotion of the payment of overdrafts. Don't hold your breath waiting for an exemption for the initial notification.

What is not said explicitly in the Federal Register notices accompanying the proposed and final rules is that regulators don't like the way banks have promoted ODP products. The many banks that have implemented ODP with the primary goal of adding to fee income -- and have done some dubious things to promote its use -- have tainted the field for any bank offering ODP as a service.

And Drowning is right. Adopting some of the Best Practices guidelines for ODP is a Catch-22 that will trigger compliance with Regulation DD's section 230.11.

The new meaning of "OD" to many waking up to the new rules is "Oh Dear" although you can substitute "Darn" or another "D" word.

And I agree with John. Examiners were talking about this 3 and 4 years ago and the ears which heard it, ignored it or didn't need to hear it. And it isn't over. If there are abuses seen still, don't be surprised when you hear of a definitional change in Reg. Z that then encompasses ODPs and all the associated disclosures.

This is our plan for now:

1. limit which transactions will activate bounce..eliminate ATM and debit card transctions and solely use for check ODS. Of couse we will have to run some reports to see where ODP usage is most active and make our decisions based on the cost or loss or revenue to the bank.
2.Tell on the statements what the available bounce is..so we will be advertising, not promoting as the regulators would like to think.
3.Add the bounce brochure describing the cost of the program and when and how the fees apply
4.Send a letter when the bounce is activated and either advise the consumer to refer to account opening materials for fees, or (we have not yet decided) send another brochure with the letter, offer an opt out (either call or send in a form).
5.We are a Jack Henry bank so we will be looking to them a process to add the required fees disclosures to the periodic statements.
6. Try to see how much this will cost..I imagine JH will have a price tag , but otherwise the cost for disclosures should not be too bad, because we will add to our existing ones and the mailing is already being done so we will have to edit it.


This is our plan so far. Any thoughts, suggestions e.g. please!

Here's a thought (and one of my early suggestions for best practices which could also have CRA service perks):

Contact your local Consumer Credit counseling agency (make sure its one of the reputable ones) and establish a referral relationship. When a customer goes too crazy on the Bounce plan, send them a brochure from Counseling Agency and suggest they seek financial counseling. Take a small percentage of the additional fee income that comes from your Bounce program and donate it to Counseling Agency for consumer credit counseling.

Jacob's Dad, or any of the others here,

Are you still viewing these "enrollment" letters as an advertisment? It sounds to me like if we offer an ODP but don't send any of the letters letting customers know about it then we don't have to abide by the disclosure requirements.

But that doesn't seem very customer friendly, does it?

What about sending a letter without the specific terms (i.e. amount)? I thought that we were all set to have Jack Henry make the changes for us, then some here wanted to rehash the advertising definition.

If you send anything to your customer that says you're providing BP -- with or without the protection amount included -- it's a promotion of the service, and it triggers the 230.11 rules.

Thanks John,
I agree with you, BUT our vendor is saying that we are fine, and of course management is listening to that. Here is a copy of the email that I got from them:

Under the Regulation DD changes effective July 1, 2006[vendor] believes that the recommended Disclosure and Opt-Out Letter intended to be sent to newly qualified participants in the [vendor] service does not come
under the category of Advertising or Promotion because the intent of the letter is to advise the customer that the service is a part of their account and that while it is an attempt to better serve the account holder,
it is not the best way to handle their account. We point out that the account holder should not overdraw their account and if they do on occasion, they would be better off utilizing some other product or service
offered by their Financial Institution for overdraft protection. We point out the cost of using the overdraft service and that cost applies whether
debits against the account are paid or returned. [vendor] specifically tells our clients that they should not reveal any overdraft limits to the account holder or any specifics about how overdraft limits are determined.

Finally,
[vendor] recommended text encourages account holders to contact their financial institution and request that the service be removed from their account if they do not want it.

I disagree with them.
This letter is a "first day" letter telling customers about the service.

Document your objections and wait to see how the examiners feels about it. good luck!

I'm having a Friday afternoon moment here. I know that effective date for the Reg DD requirements is 07/06. But, in my notes I also have a date of "01/01/06, existing accounts". Was the effective date phased in at all? I don't recall that it was.

From the commentary :
7. Totals for the calendar year to date. Some institutions’ statement periods do not
coincide with the calendar month. In such cases, the institution may disclose a calendar year-todate
total by aggregating fees for 12 monthly cycles, starting with the period that begins during
January and finishing with the period that begins during December. For example, if statement
periods begin on the 10th day of each month, the statement covering December 10, 2006 through
January 9, 2007 may disclose the year-to-date total for fees imposed from January 10, 2006
through January 9, 2007. Alternatively, the institution could provide a statement for the cycle
ending January 9, 2007 showing the year-to-date total for fees imposed January 1, 2006 through December 31, 2006.

8. Itemization of fees. An institution may itemize each fee in addition to providing the
disclosures required by § 230.11(a)(1) of this part.

(a)(3) Time period covered by disclosures

1. Periodic statement disclosures. The disclosures under § 230.11(a)(1) of this part must
be included on periodic statements provided by an institution reflecting the first statement period
that begins after the institution advertises the payment of overdrafts. For example, if a
consumer’s statement period typically closes on the 15th of each month, an institution that
promotes the payment of overdrafts on July 1, 2006 must provide the disclosures required by
§ 230.11(a)(1) of this part on subsequent periodic statements for that consumer beginning with
the statement reflecting the period from July 16, 2006 through August 15, 2006. Only depository
institutions that promote the payment of overdrafts in an advertisement on or after July 1, 2006
must provide disclosures on periodic statements under § 230.11(a)(1) of this part.

So I think that we had to start compiling data 1/1/06.

There was discussion back when the amendments came out that suggested the aggregation of overdraft fees for statement totals under 230.11(a) would have to start with 1/1/06 in order to provide a YTD figure on the July statement. I advocated for that position, but have since been persuaded that the YTD totals for this year need only include info from 7/1.

Quote:

---

Under the Regulation DD changes effective July 1, 2006[vendor] believes that the recommended Disclosure and Opt-Out Letter intended to be sent to newly qualified participants in the [vendor] service does not come under the category of Advertising or Promotion

---

That's terrific! Ask them to tell their law firm to put that wording on their letterhead and you will weigh it accordingly.

A friend (who works for an ODP vendor and is the all the way to the bottom of the well expert on all things ODP) thinks my statements that these communications clearly qualify as promotion are too inflexible. He's not without arguments.

I can readily put his arguments on one side of the scale and mine on the other. Even if I thought they were of equal weight, I would still have an anvil emblazoned with the words "The regulators hate this product" in my pocket. I don't think there's much doubt about how regulators will classify the "you're eligible" letters. My only curiosity is how the vendors will backpeddle their way out of a hole with those banks that rely on this advice to their detriment.

Thanks, that's what I thought but needed some reassurance. As far as the Reg DD requirements - we have been "promoting" our bounce product right along. We send out an activation letter telling the customer what their limit is, etc.

We are now considering making all of this go away and trying to position ourselves so that we aren't triggering the extra disclosures. Am I correct that as long as we take away all triggers before 07/01 that we would not have to make the additional disclosures, even to those customers who were "advertised" to in the past? Or would that be really stretching things?

Upstate, you are dead on. As long as you don't do any advertising on or after 7/1/06, you do not trigger the statement disclosure requirements regardless of how much you advertised them prior to that date.

As a former regulator, I can guarantee that John and Pegasus' take is exactly right. Now I'm on the bank side, I don't anticipate there will be any flexibility in this area. I also think that particular vendor is on precarious ground taking that position. In my former examiner life, I heard a lot of griping about the way the vendors were deeming their programs to be "in compliance".

I don't know why I bother. Management is sharing the same opinion as the vendor now, that the letter is fine.

You bother because you are trying to do your job right...leave a paper trail pointing in the correct direction and go on to something else.

Everytime I try to read up on the new requirements I see something new. We have had an OD program in place for some time and had been promoting or advertising it until these new regulations were proposed and implemented. Since then we have systematically been removing all references from our brochures and such in order to avoid the full disclosure requirements.

I was just reading the ODP Resource Guide provided by Bankers Online and read the definition of a "covered ODP" as being a program for the payment of overdrafts that includes a non-contractual, discretionary amount up to which your institution agrees to let a customer overdraw a consumer account.

My management stresses that we do not have a program, even though we assign a specific $$ BP to all accounts at upload and our system automatically pays overdrafts to that limit. Officer review begins at the time the account exceeds the BP limit assigned.

In my mind what we have is a "covered ODP program". It may be internal and non-disclosed, but still it is a structured program for the payment of overdrafts! Am I on the right track or just being paranoid? Please clarify!

I agree with you. You have a program. Whether your program is covered by the Regulation DD requirements is the question. To know that, you need to know whether you communicate anything about the program to your depositors. If you don't tell them about your program, don't include any reference to it on flyers, brochures, ads, ATM screens, your web site, etc., and don't include the overdraft "cushion" amount in any balance (by itself or in combination with the available balance) at the teller line, on voice response or at ATMs, you're pretty safe.

One suggestion -- check out your ATM balances carefully. Do you allow customers to go OD with an ATM or POS transaction? If so, you are probably authorizing against a balance that includes your "cushion" amount. Make sure the balance inquiry function doesn't go to the same "cushioned" balance, and that it doesn't print on ATM records.

I wouldn't call you paranoid. Maybe careful?

to those that also have the activation letter method--
this is what we also have, and i understand it must go if we do not wish to produce the periodic statement disclosures.
How are you going to advise the customer of the program?
Can this be done at account opening in any way?
Or are you basically looking at approving those that qualify - and not notifying them. Those that dont qualify - dont get any notice anyway.

I am a bit new, but are you considering not enrolling customers unless they request your ODH program?
Create an educational doc to go in every account opening file, explaining what an overdraft program is-- but not saying as us about ours or acknowledging specifics or even its existance. Then rely on the customer to iniate the inquiry - allowing information to be given to the customer and/or enrollment.
At enrollment (as described), would there even be any disclosures required?

How can you enroll a customer in a service, and have never told/disclosed it to them?