Letter to the Editor: Overdraft Plan Rule Needs Clarification

To the Editor:

The May 26 article "No One Happy About Overdraft Disclosure Rule" took an accurate pulse on the May 19 overdraft program marketing rule and its effect on bank compliance costs. The rule, demanded by consumer advocacy groups, will impose a cost that will eventually trickle down to bank customers. I would like to commend the federal agencies for stepping forward Feb. 18 and announcing final guidance and best practices on overdraft programs. The payment of nonsufficient-fund items creating overdrafts has been part of banking since its inception, and while a common practice in most financial institutions, it is one that often is subjective and allows for disparate treatment of customers.

It is a win for the banking industry and its customers that the disclosure of overdraft programs falls under the Truth-in-Savings Act.

Under that law, advertisements and marketing for bank programs cannot be misleading, inaccurate, or misrepresent a depository institution's deposit account - something on which we can all agree.

Reg DD does not completely define the disclosure of overdraft programs. Unless further clarification is given, many banks and their core system vendors, to err on the side of caution, will spend money to alter monthly statements to restate fees which are already available to bank customers.

Although we would hope there are no bad apples in the banking barrel, the guidance and practices ensure that all financial institutions and overdraft program providers are moving in a customer-conscious direction. Before July 1, 2006, overdraft protection program disclosure will need further clarification so that all financial institutions will benefit from this guidance and uniform decisions from regulators.

Barrett Nichols
Founder and chief executive
BSG Financial LLC
Louisville

Editor's Note: The consulting firm's flagship product is an overdraft payment program.