Overdraft Privilege Product

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Question:

We offer an Overdraft Privilege Product, and to date, have allowed bank employees to use it just as the non-employee customers. We're looking at drafting a new Employee Overdraft policy and would like to know if it would be discriminatory to not allow our employees to have the Overdraft Privilege Product? What do you hear from examiners on this issue?

Answer:

Is it discriminatory to not allow employees to overdraw their account? No, I have seen banks that absolutely held its employees to a higher standard and some that felt the employee should get the same benefits as customers. The choice is yours. Ensure you inform the employee of the rules applicable to them.

Where you will have to decide which is correct, is when you have a customer with overdraft privilege who uses, but does not abuse this, who becomes an employee. Second case, employee's spouse opens an account. Is that person entitled to use the program? What if funds are moved from one account to another, effectively playing by the rules, but using them to the employees advantage?

The only area where you get into possible issues is when you treat employees and officers differently than other customers. While there are no Reg O-like restriction for employees and their deposit accounts (less interest rates in some cases, and the waiver of overdraft fees for insiders) you do have to determine what is ethical. Waiving fees and providing higher limits for employees does send the wrong message. Treating employees the same or to a higher standard is up to your bank.

First published on BankersOnline.com 7/05/10