We have a director with a preapproved overdraft protection line of credit who still overdrew his checking account because he forgot that his ODPLOC was already partially advanced leaving insufficient funds available on the LOC to cover the check. The overdraft was more than $1,000, but the morning after the check posted (processing day plus one), when we make overdraft decisions, we called him immediately and he authorized a transfer of collected funds from another account at our bank to cover it, so we paid the check. Our external auditors have cited this as a Reg O violation and said that we should've returned the check since the overdraft was more than $1,000. I found an old BOL Q & A from 5/5/08 answered by John Burnett in which he responded to a similar situation by explaining that "a covering deposit of collected funds to cure the overdraft on posting date plus one would also be acceptable." But I cannot find any "official interpretation" from regulators to support this. Anyone have other ideas?
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Kerry B.