Public Comment, Study of Overdraft Protection, ICBA

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Public Comment, Study of Overdraft Protection, ICBA

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February 28, 2007 Steve Hanft Legal Division Federal Deposit Insurance Corporation th550 17 Street, NW Washington, DC 20429 Study of Overdraft Protection Programs Dear Mr. Hanft: 1 The Independent Community Bankers of America (ICBA) appreciates the opportunity to comment on the FDIC’s proposed survey of current bank overdraft protection programs. According to the February 7 Federal Register announcement, the FDIC plans to survey approximately 500 state-chartered nonmember banks. Each bank will be asked a series of 88 questions about its overdraft policy and procedures. Approximately 100 of these banks will be selected for closer examination to obtain more detailed information. The FDIC plans to use automated data collection techniques where possible to minimize burden. Overview of ICBA Comments ICBA questions whether it is appropriate to survey banks about their overdraft protection programs at this time. Since interagency guidance and best practices for handling overdrafts is relatively recent, conducting this survey seems premature. ICBA is not aware of safety-and-soundness concerns or other problems that warrant this 1 The Independent Community Bankers of America represents the largest constituency of community banks of all sizes and charter types in the nation, and is dedicated exclusively to representing the interests of the community banking industry. ICBA ...

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Publié par	Chaes
Nombre de lectures	42
Langue	English

Extrait

February 28, 2007

Steve Hanft

Legal Division

Federal Deposit Insurance Corporation

550 17

Street, NW

Washington, DC

20429

Study of Overdraft Protection Programs

Dear Mr. Hanft:

The Independent Community Bankers of America (ICBA)

appreciates the

opportunity to comment on the FDIC’s proposed survey of current bank overdraft

protection programs.

According to the February 7

Federal Register

announcement, the

FDIC plans to survey approximately 500 state-chartered nonmember banks.

Each bank

will be asked a series of 88 questions about its overdraft policy and procedures.

Approximately 100 of these banks will be selected for closer examination to obtain more

detailed information.

The FDIC plans to use automated data collection techniques where

possible to minimize burden.

Overview of ICBA Comments

ICBA questions whether it is appropriate to survey banks about their overdraft

protection programs at this time.

Since interagency guidance and best practices for

handling overdrafts is relatively recent, conducting this survey seems premature.

ICBA

is not aware of safety-and-soundness concerns or other problems that warrant this

The Independent Community Bankers of America represents the largest constituency of community

banks of all sizes and charter types in the nation, and is dedicated exclusively to representing the

interests of the community banking industry. ICBA aggregates the power of its members to provide a

voice for community banking interests in Washington, resources to enhance community bank education

and marketability, and profitability options to help community banks compete in an ever-changing

marketplace.

With nearly 5,000 members, representing more than 18,000 locations nationwide and employing over

268,000 Americans, ICBA members hold more than $908 billion in assets, $726 billion in deposits, and

more than $619 billion in loans to consumers, small businesses and the agricultural community. For

more information, visit ICBA’s website at www.icba.org.

investigation.

ICBA also believes this survey will be burdensome and may not produce

useful results, especially since it is not clear what motivated the survey or what goals the

information collection hopes to achieve.

Before the next step is taken, it will be

important for the FDIC to identify how banks will be selected for the survey and whether

responding will be optional or mandatory.

Finally, ICBA believes it is incorrect to

presume automation can be used to collect the data, since the survey as designed may not

be compatible with existing bank software programs.

As a result, the only way to

automate the data collection would require extensive revision and reprogramming of

bank computer systems.

Need for Survey

ICBA believes that surveying bankers on overdraft protection programs may be

premature.

While banks have allowed customers to overdraw their accounts for almost as

long as customers have had banking relationships, automated techniques to let customers

who meet pre-set parameters overdraw their accounts is a relatively recent development.

This use of technology drew attention to overdraft programs, prompting the federal

banking agencies to propose guidelines for banks.

Final interagency guidelines

were

released in February 2005 to address safety and soundness considerations, legal risks and

best practices for banks to consider.

Separately, the Federal Reserve updated Regulation

DD, which implements the Truth-in-Savings Act, to provide additional guidance on

overdraft programs.

The changes to the Federal Reserve’s rule did not take effect until

July 1, 2006 – less than one year ago.

As a result, it is too soon to survey bankers on overdraft program policies and

procedures.

Any data collected now would not present a clear and accurate picture since

the recent changes have not had sufficient time to fully take effect.

This is especially true

if the survey follows the proposed format.

While it would collect data about how a bank

handles overdrafts, it does not take into account changes in policies and procedures that

may have resulted from the recent guidance, nor does it distinguish between what

preceded the guidance and what followed it.

If a bank changed procedures as a result of

the guidance, the survey would not reflect that change.

This would produce misleading

data.

While some might argue that data collected today would provide a baseline,

because changes are still taking effect and because the data would indiscriminately

combine information before and after the guidance was issued, it would not be an

accurate baseline.

In fact, burdens associated with collecting and reporting the

information might cause some banks to eliminate overdraft protection programs, further

skewing the usefulness of the data as a baseline.

Since no data was collected before the

guidelines were published or the applicable rule change, ICBA recommends that the

proposed survey not be undertaken until enough time has passed to allow the changes to

fully take effect.

Joint Guidance on Overdraft Protection Programs

, see FIL-11-2005 issued by the FDIC

February 18, 2005.

Moreover, there is nothing to indicate there are safety and soundness concerns or

other problems that require such a burdensome collection of data.

Neither the FDIC nor

the other banking regulators have indicated any problems.

The Interagency Guidelines

and changes to the Federal Reserve rule affecting overdraft protection programs were

issued to address any problems or concerns that may have existed, but nothing has

indicated the guidelines did not do what they were designed to accomplish.

ICBA is also concerned that conducting such a survey indicates a bias against

overdraft protection programs.

Well-designed and properly disclosed overdraft

protection programs can be a useful and beneficial customer service.

For example, even

though consumers are encouraged to regularly balance account statements, anecdotal

evidence suggests those who do are the exception rather than the rule.

Overdraft

protection programs save those who have not properly balanced their account statements

the embarrassment and expense of bouncing a check.

Eliminating or discouraging

overdraft protection programs, as the survey might do, would do these customers a

disservice.

Need for Transparency

The FDIC has not published the survey or made it readily available to the public.

Instead, interested parties must request a copy to review its content and format.

As noted,

ICBA believes that properly structured overdraft protection programs can benefit

consumers.

In fact, many bank customers find them useful for avoiding unnecessarily

bouncing checks and the resulting fees and inconvenience.

On the other hand, some

consumer activists strongly oppose the programs and contend they should be banned or

heavily restricted.

Because this controversy surrounds overdraft protection programs,

ICBA believes it would be more appropriate for the FDIC to publish the proposed survey

or make it readily available on the agency’s website to allow all interested parties to

easily review and comment on it.

At the same time, the FDIC should specify why it

proposes the survey to allow interested parties to comment on the rationale for

conducting the survey.

It is important to recognize that last year’s Regulatory Relief Bill requires the

banking agencies to carefully review data collected through Call Reports to ensure that

the data collected is useful and necessary.

Consistency with this Congressional mandate

is another reason ICBA recommends the FDIC articulate the need for this data collection.

Regulatory Burden

The FDIC has not indicated whether banks must respond to the survey or whether

providing the information is voluntary.

Data collection can be very burdensome for all

banks, but especially community banks.

Therefore, ICBA believes it is important for the

FDIC to clearly state whether the banks asked to respond to either phase of the survey are

doing so voluntarily or under an agency mandate.

Moreover, it would be helpful if the

ways to accomplish those goals.

Automation

The FDIC suggests it will use automation to collect the data where possible, but

ICBA questions whether this is truly feasible.

Requiring data to be provided

electronically, especially for the second phase of the survey, could actually be costly and

time-consuming for many banks.

If a bank does not maintain information in the formats

requested, providing it electronically will require software modification – involving

possibly extensive revisions to existing software programs.

And, since many community

banks rely on third-party service providers, it will take time to contact outside service

providers to have them revise programs to provide the data.

To ensure data is requested

in a format banks can easily supply without costly reconfiguration of existing software,

ICBA again recommends the FDIC meet with industry representatives and software

providers to determine whether existing programs can be easily used to provide the

information the FDIC seeks.

Conclusion

Before moving forward, ICBA strongly recommends that the FDIC clearly

explain why it plans to conduct the survey and that the agency work with interested

parties, especially industry representatives.

This would help the FDIC find ways to

collect the data in the most effective and efficient manner.

As currently proposed, the

survey could be a potentially burdensome and costly exercise for community banks but

may not provide useful information.

Fundamentally, ICBA is concerned the survey may

discourage banks from continuing to offer what many consumers find to be a useful and

beneficial product.

To avoid these possible unintended consequences, ICBA

recommends the agency work in collaboration with all interested parties.

Thank you for the opportunity to comment.

If you have any questions or would

like additional information, please contact the undersigned by telephone at 202-659-8111

or by e-mail at

robert.rowe@icba.org

Robert G. Rowe, III

Regulatory Counsel

cc: OMB Desk Officer for the FDIC

Office of Information and Regulatory Affairs

Office of Management and Budget

New Executive Office Building

Washington, DC

20503

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