Answer:
Overdrafts exceeding $1M are either covered with other funds, such as from another account, or an interest bearing line of credit.
$1M or less is OK so long as it falls under the terms of being an inadvertant overdraft, i.e. time and fee restrictions.
(i) A written, preauthorized, interest-bearing extension of credit plan that specifies a method of repayment; or
(ii) A written, preauthorized transfer of funds from another account of the account holder at the bank.
(2) The prohibition in paragraph (e)(1) of this section does not apply to payment of inadvertent overdrafts on an account in an aggregate amount of $1,000 or less, provided:
(i) The account is not overdrawn for more than 5 business days; and
(ii) The member bank charges the executive officer or director the same fee charged any other customer of thebank in similar circumstances.
First published on BankersOnline.com 9/3/01
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