Overdrafts

Posted By: WIBanker91

Overdrafts - 08/23/21 03:11 PM

There is guidance from 2005 regarding overdrafts that in general says there should be no more than 4 payments or it falls under Reg Z and that the overdraft should be charged off after 60 days. Two questions- Is this still accurate? Are there similar repayment rules for Commercial accounts? Trying to refresh myself, we hardly have any overdrafts and even fewer that are not resolved quickly but have a commercial OD approaching the 60 days.
Posted By: BrianC

Re: Overdrafts - 08/23/21 03:41 PM

The guidance is still valid and the accounting requirements for charge-offs at 60 days remain unchanged.(45 days for credit unions.) This is applicable to both consumer and commercial accounts as this is an accounting practice, not a consumer protection regulation.

For repayment plans, although Regulation Z may not apply to a commercial account, you must also consider whether the business' corporate resolution grants the authority to the officer to borrow money on behalf of the business. If it doesn't you could find yourself with an unenforceable agreement.