Clarification of the FDIC Final Overdraft Program Guidance. In our last Regulatory Update to our clients dated March 9, 2. Overdraft Payment Program Supervisory Guidance (FIL- 8. FDIC. Clarification of . Those questions included. What impact will a high to low posting order have during a compliance or safety and soundness exam if this posting order is maintained for checks and ACH but ATM and POS items are posted first? FDIC staff provided an overview of the Guidance and discussed examination and implementation issues gleaned from their discussions with financial institutions. In addition they addressed some of the questions sent in by FDIC- supervised banks. The issues and questions noted in our last Regulatory Update as requiring further clarification were discussed during the teleconference and are included in the FDIC Overdraft Payment Program S upervisory Guidance Frequently Asked Questions document that was published after the teleconference and posted at www. FAQ. html on April 1, 2. However, all financial institutions authorizing overdrafts, whether through an automated or an ad hoc approach, must manage potential reputational, compliance, and litigation risks regarding certain overdraft payment practices, such as check clearing practices designed to maximize overdraft fees. Rather, they view the Guidance as . The interagency guidance. Joint Guidance on Overdraft Protection. OTS, NCUA: Interagency Guidance on Overdraft. The banking agencies have proposed interagency guidance on overdraft protection programs to. The staff gave no indication as to whether examination guidelines or guidance would be available to bankers. Absence of these plans, policies and procedures may raise . Bank Boards of Directors should be aware of and periodically review key elements of their overdraft programs. The Guidance, as it relates to fees, is specific to overdraft (OD) fees, or fees for paying items that result in or increase a negative balance. The Guidance recommendations are similar to Pinnacle's Critical Success Factors. For example, posting in serial or sequence number order, or posting in batches as long as the batches are not arranged and processed in a manner designed to increase overdraft fees. The FDIC views re- sequencing transactions to a high to low order as an attempt to maximize overdraft fees. The FDIC staff stated that it is their belief that customers who have opted out of the program reasonably believe they will not incur OD fees for paid items. They encouraged banks to tread lightly and carefully when considering whether to charge OD fees if items are being paid as a courtesy to these customers. Joint Guidance on Overdraft Protection Programs. Interagency Guidance on Nontraditional Mortgage Products. Joint Guidance on Overdraft Protection Programs. February 18, 2005: Agencies Issue Final Guidance on Overdraft Protection Programs. Bank Overdraft Programs. Description: Interagency Guidance. Interagency Guidance 70 FR 9127. The Strangling of Overdraft Protection. Interagency Guidance. However, the FDIC made clear that NSF fees for returned items of such customers is permissible. Additionally, each subsequent fee that is assessed in relation to the original charged item, such as a daily or recurring fee, is considered an occasion. Note: An NSF fee for returning an item is not a fee covered by the Guidance, is not prohibited and does not count toward the . FDIC staff indicates this follow up should take place within a . Agencies Issue Final Guidance on Overdraft Protection Programs. Banks should have their legal. Protection Programs with new interagency guidance that. According to FDIC staff, they consider a reasonable time generally to be within 3. The key is to ensure that customers are able to make informed choices among available options to manage their finances. They are the Enhanced Periodic Statement and Targeted Outreach approaches. Enhanced Periodic Statement Approach. Institutions should consider using customer communication tools already in place. For example, statement messages used in conjunction with the Reg DD required disclosure of statement cycle and year- to- date overdraft fees paid may help educate or prompt customers to contact a knowledgeable employee of the financial institution to discuss overdraft protection options. The FDIC Overdraft Payment Program Supervisory Guidance Frequently Asked Questions document implies the statement message would appear on the statements of those customers meeting the . However, many banks already do offer some form of short- term alternative, including lines of credit, fixed- term small dollar loans, and linked savings accounts. Banks are expected to inform customers of these services and make them available if the user qualifies. While no specific format for documenting or recording customer contact and discussions was prescribed by the Guidance, FDIC staff indicates the financial institution should be able to demonstrate that it monitors account usage, undertakes programs designed to address excessive or chronic use, and monitors its success in informing customers who use overdraft payment programs frequently of the high cumulative costs of the program and the availability of alternative programs or services. As a result, they cannot expect banks to have all customers opt- in for overdraft coverage for transactions not covered under Reg E (ATM and everyday debit card transactions). However, customers should be permitted to opt- out of overdraft privilege programs and banks should consider periodically reminding customers who reach the . The FDIC staff responded that web- based training is an acceptable option under the Guidance. Clients who are following our Critical Success Factors in managing and administering their overdraft privilege programs have the benefit of providing a service that already, for the most part, reflects the expectations outlined by the FDIC. And Pinnacle's new Financial Education Solution will help you address the FIL intent to communicate with, educate and protect consumers. Preview it at www. Please contact your Client Service Manager if you have any questions about your program under the new Guidance.
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