Fresh Start Programs to pay back ODs.

Does anyone still offer "Fresh Start" plans to pay back an overdraft? I am referring to the plans with no more than 4 installments that are not subject to Reg Z?

My bank has never offered them, but we have have an Overdraft Program. Rather than, automatically charging an account off, I would like to give the customer the opportunity to pay back the OD and maintain a checking account (excluded from the OD program, of course).

"Rather than, automatically charging an account off,"

Unless you are going to properly underwrite these credits and book these loans as assets to your loan system, it is not going to prevent the requirement to charge these accounts off.

Really??? I didn't realize that we were required to charge off an account prior to setting a customer up in a Fresh Start program. At my previous bank, we allowed them to keep their account but revoked their OD privilege and debit card. I don't remember their ever being any scrutiny from regulators over this. We had a trial balance for Fresh Start customers.

Is this new or was it always supposed to be this way?

From the 2005 interagency guidelines:

In some cases, an institution may allow a consumer to cover an overdraft through an extended repayment plan when the consumer is unable to bring the account to a positive balance within the required time frames. The existence of the repayment plan, however, would not extend the charge-off determination period beyond 60 days (or shorter period if applicable) as measured from the date of the overdraft. Any payments received after the account is charged off (up to the amount charged off against allowance) should be reported as a recovery. Some overdrafts are rewritten as loan obligations in accordance with an institution’s loan policy and supported by a documented assessment of that consumer’s ability to repay. In those instances, the charge-off timeframes described in the Federal Financial Institutions Examination Council (FFIEC) Uniform Retail Credit Classification and Account Management Policy would apply.

We bring the account to a zero balance and move the negative balance off to a general ledger specifically used for Fresh Start before the account reaches 60 days overdrawn. I think our Fresh Start account is similar to a suspense account. Then as payments are received they are applied to the Fresh Start account. The account is never charged off unless they don't pay back the amount owed on their Fresh Start.

Yes, "Its Just Me"... that is exactly the way it was done at my previous bank. So- Randy, is this still wrong?

IMHO - Yes. Once the amount due the bank is 60 days old due to an overdraft, it doesn't matter what you do internally - it has to be charge-off and accounted for according to the guidance.

What if the Fresh Start Program is offered before the account has been overdrawn 60 days?

The clock starts on day one of the overdraft - like I said, what you do internally doesn't matter - if you leave it in the account or transfer it to some "fresh start" program, on day 61 it has to be charged-off unless you underwrite the borrower and turn it into a qualified loan.