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#481692 - 01/11/06 08:57 PM Reg DD: Overdraft Protection
Bankster Offline
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The Reg DD Final Rules regarding overdraft programs require overdraft fees and returned item fees to be disclosed both for the statement period and for the calendar year to date. What about the fees that are refunded to customers? Do those fees need to be included in the above totals? Thanks.
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#481693 - 01/11/06 11:06 PM Re: Reg DD: Overdraft Protection
John Burnett Offline
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Best answered with an example. Assume you impose $75 in overdraft fees and $50 in return item fees in the month of April. The customer complains in May, and you agree to refund $50 of April's overdraft fees and none of the return item fees.

You can't deduct the refunded $50 from the May statement period total for overdraft fees. That's not permitted. But you MAY (optional) reduce the YTD total for overdraft fees imposed. If May's Overdraft fees total $100, and the YTD at the end of April was $500, the May YTD figure could appear as $600 (not reduced by the refund) or as $550 (to reflect the refund). The May statement figure would be $100, period.

APRIL STATEMENT
OD FEES THIS STMT $ 75.00 YEAR TO DATE $ 500.00
RETURN ITEM FEES THIS STMT $ 50.00 YEAR TO DATE $ 750.00

MAY STATEMENT
OD FEES THIS STMT $ 100.00 YEAR TO DATE $ 550.00*
RETURN ITEM FEES THIS STMT $ 50.00 YEAR TO DATE $ 800.00

* - This shows the effect of reducing YTD by the amount rebated in May. If bank doesn't reduce the YTD figure for rebates, this figure would be $600.00. Either approach is permitted by the regulation.
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#481694 - 01/12/06 05:06 PM Re: Reg DD: Overdraft Protection
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Thank-You!
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#481695 - 02/02/06 06:13 PM Re: Reg DD: Overdraft Protection
banjo Offline
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I had a couple of questions regarding this subject, and was hoping someone could answer them:

If we advertise an overdraft program for checking accounts, but a customer opts out of the program, would the new overdraft & return item fields for the period and year-to-date have to be included on his particular statement?

Are all overdraft & return fees required to be aggregated in the new fields, or only those charged for overdrafts within the stated bounce protection limit? For example, a customer has 2 overdrafts, one occuring within the stated limit, and one over the limit. Both are paid. Are both required to be aggregated in the new fields, or only the one that fell within the customers stated limit?

Thank you.

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#481696 - 02/02/06 10:20 PM Re: Reg DD: Overdraft Protection
John Burnett Offline
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If you promote the payment of overdrafts in connection with selected types of accounts, the statement total requirements will apply to all accounts of those types, including those of any customer who has opted out. Frankly, the regulation doesn't even recognize the concept of opting out.

For accounts on which you must provide the new totals, all overdraft fees get accumulated, whether or not the items triggering the fee fall within the stated bounce coverage amount. The total alse includes any related fees, such as interest on overdrawn balances or fees for paying items against uncollected/unavailable funds.
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#481697 - 02/03/06 03:58 PM Re: Reg DD: Overdraft Protection
StevenD Offline
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John, I disagree

230.11.(a)(1)(B)(ii) The disclosures required by this paragraph must be provided for the statement period and for the calendar year to date, for any account to which the advertisement applies.

Since the customer opted out, the advertisement does not apply to his account. The text here doesn't say to any 'type of account' to which the advertisement applies.
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#481698 - 02/03/06 04:07 PM Re: Reg DD: Overdraft Protection
John Burnett Offline
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Steven -- Please review the commentary on this section and see if you still believe you can suppress the totals on accounts that have been "opted out." I simply don't see the language that takes me to that conclusion. On the flip side, I don't see language that definitely precludes your opinion, either. If you distinguish an opted out account as a different "type" of account, your conclusion sounds more reasonable to me.

From a practical perspective, how much effort will be involved maintaining the "opted out" flag in a statement program that could interpret that flag to suppress the printing of totals? And will there be additional hassles explaining to examiners/auditors why some accounts don't get the totals while others do?
Last edited by John Burnett; 02/03/06 04:12 PM.
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#481699 - 02/03/06 04:52 PM Re: Reg DD: Overdraft Protection
banjo Offline
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Thanks John for your comments - they are exactly what I thought when reading the regulation; however, we are having trouble convincing our programming vendor, so I wanted to make sure I hadn't missed something.

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#481700 - 02/03/06 08:28 PM Re: Reg DD: Overdraft Protection
Maria Offline
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John,

I also have been not been clear as to whether to reflect the disclosures on a periodic statement for customers that have opted out of our overdraft protection program.

I wanted some clarity on the revised regulation so I went directly to one of our agency's examiners for their opinion. I am blessed to have a good relationship with them and I like the fact that I can go to them with questions.

Here is a copy of my conversation:

My Comments:
Section 230.11 of the revisions implements the statement disclosure requirements to add four new disclosures to periodic statements for any account to which the overdraft protection applies. The added fields are the total amount of fees or charges imposed on the deposit account for paying overdrafts and the total amount of fees charged for returning items unpaid. The field disclosures will be required for both the current statement period and the calendar year-to-date.

It is not problem to accomplish the above requirement. We just need to identify the various types of accounts that have the ODP. The problem comes when or if I only want the accounts that have the ODP to reflect the new statement disclosure requirements. We would have to manually omit the accounts that the customer choose not to have the ODP. This would take a lot of time & could cause for error.

Would it be wrong if all the various types of accounts that qualified for the ODP reflected the new statement disclosure requirements, even if the customer chose to opt-out of the ODP? The disclosure would just reflect $0 for the dollar amounts. In my mind it is a more conservative approach by over-disclosing. What do you think?

Response:
In this case, I do not think that it will be a problem if all the applicable accounts contained the new disclosures. You would just need to be sure that the dollar amounts reflect $0 if the customer does not have the overdraft protection.

End of conversation

From our conversation and the potential to accidently have fees displayed on an "opt out" account, I was recommending performing maintenance on each account that opts out.

Because of the additional work involved, now that I read this thread today and went back to re-read the revision and commentary, I am leaning back to allowing the disclosure on statements for opt out customers. But what about the customers that opt out and have NSF fees or we decide to pay a item even though they do not have overdraft protection? The disclosure on the statment will reflect those fees. Is this a violation of the regulation? It was my interpretation from my conversation with my examiner that it was and the fields need to be $0 all the time.

What are your thought? Can we get some additional guidance on this? I am getting more confused again. We are running out of time to make a decision on how to proceed.

Thanks for your help and opinion.

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#481701 - 02/03/06 08:58 PM Re: Reg DD: Overdraft Protection
Elwood P. Dowd Offline
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Even if I do not access my transaction account by any electronic means, there is no problem in the fact that the Regulation E error resolution notice appears on the back of it.

Even though the customer has opted out of ODP, there is no problem in the fact that the additional disclosures appear on his periodic statement. If the customer incurs no fees for NSF checks paid or NSF checks returned, then the amounts reflected will be zero. If he does incur fees then they will be reflected following the same format used for those who did not opt out. That's not a problem.

If there is any incentive for not putting the disclosures on all consumer account statements, I don't find it here. There are some banks that are modifying all of their statements, including those for business accounts, to reflect the new disclosures. I can think of several reasons why that might be a good idea.
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#481702 - 02/03/06 09:07 PM Re: Reg DD: Overdraft Protection
banjo Offline
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My understanding from reading the regulation was if we promote an overdraft service on checking accounts, the new fields had to show on all checking accounts - I didn't see any exceptions for the checking accounts where customers opted out of taking the service.

I also understood the regulation to require all fees for paying and all fees for returning be aggregated in the new fields. I didn't see anything that indicated only those fees assessed for items within the customer's overdraft limit needed to be included. If that were the case, wouldn't it appear confusing to the customer? One fee for paying an item within the overdraft limit, one for paying an item over the overdraft limit - both are shown in the debit section of the customer's statement (probably called the same thing) - only one is included in the aggregate, so it wouldn't appear to add up correctly.

Am I not understanding the regulation correctly? This doesn't seem to go along with what your examiners told you.

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#481703 - 02/03/06 09:11 PM Re: Reg DD: Overdraft Protection
Maria Offline
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Ken,

You stated, "there is no problem in the fact that the additional disclosures appear on his periodic statement. If the customer incurs no fees for NSF checks paid or NSF checks returned, then the amounts reflected will be zero."

But what happens if this customer, that has opted out, does have NSF fees. These fees will be reflected in the disclosure on the statement so it would not be $0 and this disclosure is really not applicable to this customer since they do not have overdraft protection. Athough the account type qualified, the customer chose not to. This is where I am confused as to whether this would be a violation.

If it is, then we better not have the disclosure on statments where the customer has opted out. Correct?

Thanks so much for trying to clarify it for me.

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#481704 - 02/03/06 09:22 PM Re: Reg DD: Overdraft Protection
Elwood P. Dowd Offline
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If the customer has opted out you will still charge a fee for an NSF item paid or returned. Regulation DD has always required that you disclose that fee in the initial disclosure. It has always required the the fee be shown on the periodic statement.

Since the customer has opted out, the regulation does not stipulate that the fee be shown on the periodic statement in a certain way. If it's clear and conspicuous, you can show it any way you wish, including exactly the way you do on your accounts where no opt out has taken place.

Ask your examiner to explain what you believe she said to you; I am certain that she did not mean zeros would be imbedded in any field for customers who opted out.
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#481705 - 02/03/06 09:43 PM Re: Reg DD: Overdraft Protection
Maria Offline
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Ken,

Thank you!

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#481706 - 02/04/06 10:22 PM Re: Reg DD: Overdraft Protection
John Burnett Offline
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The regulation has always allowed institutions the OPTION of aggregating a statement total of fees for paying overdrafts and fees for returning items. That's in the Commentary to section 230.6. The MANDATORY totaling in 230.11(a) applies to institutions that promote the payment of overdrafts.

Regulation DD has never prevented extra information, as long as it doesn't interfere with the information you must present.
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#481707 - 02/28/06 04:03 PM Re: Reg DD: Overdraft Protection
Maria Offline
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John or Ken,

I am reviewing my recommendations for our bank again regarding which statements should include the new disclosures.

After reviewing your comments, regulation requirements, etc. I agree all account types that offer the overdraft program should include the disclosures, even the customers that choose to "opt out".

But I am confused as to the customers that we consciously excluded from the overdraft program even though the account type allowed that type of account to be included in the program. Example would be a certain type of checking account is permissible to have ODP but we counsciously exluded organizations. In this scenerio, would we be ok to allow the organization's statement to reflect the new disclosures?

Thanks so much for your opinions.

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#481708 - 02/28/06 04:26 PM Re: Reg DD: Overdraft Protection
Elwood P. Dowd Offline
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As I mentioned above, some banks are simply making the changes to all of their periodic statements, including those that are not consumer purpose accounts and are, thus, not subject to Regulation DD.

If there are any drawbacks to the decision, I hope someone will point them out.

Personally, I don't think the new information on the periodic statements will impact consumer handling of their checking accounts. (That's particularly true since most consumers don't balance or, perhaps, even open their periodic statements.) However, if the powers that be believe otherwise, I'm all for them and would rather not have my employees trying to figure out and explain multiple statement styles.
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#481709 - 02/28/06 04:42 PM Re: Reg DD: Overdraft Protection
John Burnett Offline
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Quote:

Example would be a certain type of checking account is permissible to have ODP but we counsciously excluded organizations. In this scenario, would we be ok to allow the organization's statement to reflect the new disclosures?




I will echo Ken's comments suggesting that using one standard statement layout makes life a lot easier for your customer contact people. But I'll focus on your mention of having excluded "organizations." Truth in Savings and Regulation DD don't apply to accounts held by organizations, so there is no need to add the §230.11(a) disclosures to statements for these accounts.

There's no conflict between my thoughts and Ken's here, however. It's very common for banks to have one statement layout for consumer accounts and another for business accounts.
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#481710 - 02/28/06 05:10 PM Re: Reg DD: Overdraft Protection
Maria Offline
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Ken and John, Thank you both for your comments.

None of the class codes that were excluded would have been Reg DD applicable since they are not consumer accounts.

Right now we do not differenciate statement formats for consumer and commercial accounts.

I think I am better off just letting the account type be the determining factor for the new disclosures.

I feel like this is one of those regulatory changes that I am so caught up with being in compliance that I am overlooking the reason for compliance. Compliance is to give people more knowledge and that is what we are doing by including the statement disclosure (whether the customer has ODP or not). I am going to relax and just go with it.

Thanks again.

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#481711 - 03/13/06 03:35 PM Re: Reg DD: Overdraft Protection
Summer101 Offline
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Going back up to the initial question in this post and John's example. $75 in o/d fees are charged in April. Customer complains in April and $50 of those fees are refunded in April before the statement is pulled ... would the bank be able to adjust the monthly and YTD totals for the April statement?

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#481712 - 03/14/06 06:18 PM Re: Reg DD: Overdraft Protection
David Dickinson Offline
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Good question. Common sense says you should be able to adjust your YTD totals, but this isn't address in the regulation. In fact, the regulation states "total . . . imposed". A conservative approach would say even if it is refunded, it was still imposed. I guess it depends on your nature: conservative or aggressive, and how much you want to argue this issue.
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#481713 - 03/16/06 08:18 PM Re: Reg DD: Overdraft Protection
KSalberta Offline
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Quote:

Steven -- Please review the commentary on this section and see if you still believe you can suppress the totals on accounts that have been "opted out." I simply don't see the language that takes me to that conclusion.




I don't either, John. In several places it says that you have to provide the new disclosures for all accounts after advertising the service, i.e.

"2. Applicability of periodic statement disclosures. The periodic statement disclosures apply to all accounts for which the institution has advertised the payment of overdrafts. For example, if an advertisement promoting the payment of overdrafts specifies the types of accounts to which the advertisement applies, the institution would not be required to provide the periodic statement disclosures for other types of accounts offered by the institution for which the advertisement does not apply. If an advertisement does not specify the types of accounts to which it applies, the advertisement would be considered to apply to all of an institution’s deposit accounts."

Since the regulation is focused upon the promotion aspect, and always discusses classes of accounts, you have support within the regulation for disclosing the fees on all classes of accounts for which OD is publicized, but no textual support not to do that.

If you are using an alternate statement format for opt-out accounts, how would you handle someone who had several months of fees and then opted out? Since the reg required you to disclose the year-to-date I can see someone claiming they should have gotten the aggregate disclosure at least on the next statement.

I think it is far, far safer to use the new format for all classes of accounts for which the service has been marketed.

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#481714 - 03/16/06 10:27 PM Re: Reg DD: Overdraft Protection
StevenD Offline
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I can't argue with your logic, but it seems to me that the drafters of the regulaation clearly envisioned that some accounts would and some would not get the disclosures.

Else, why would they even need this distinction 'at the account level' if they expected that all accounts would get the disclosure.

230.11(a)(4)Termination of promotions. Paragraph (a)(1) of this section shall cease to apply with respect 'to a deposit account' two years after the date of an institution's last advetisement promoting the payment of overdrafts applicable 'to that account.'

This indicates the need for an account level control to allow print or not print for the disclosures.

I belive the distinction arises from the last sentence of the section you cited from the Official Staff Interpretation:

"If an advertisement does not specify the types of accounts to which it applies, the advertisement would be considered to apply to all of the institutions deposit accounts."

As with many things mentioned here in this thread and in others, it may depend on how you advertise.
Last edited by StevenD; 03/16/06 10:27 PM.
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#481715 - 03/16/06 11:32 PM Re: Reg DD: Overdraft Protection
John Burnett Offline
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You are not allowed net the refund of March fees against the amount collected in April. The April statement must show the total of fees imposed in April. You are permitted (but not required) to deduct the rebated amount from the YTD field, however.
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#481716 - 03/17/06 02:57 PM Re: Reg DD: Overdraft Protection
Summer101 Offline
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I understand that you can't reduce April's monthly total for March fees that are refunded in April. But what if there are fees charged in April that are refunded in April ... all on the same statement. Can the April statement's monthly and YTD totals be adjusted for April refunds?

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