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FIRST
HAWAIIAN BANK
August 6, 2004
Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, DC 20429
Subject: Docket No. OP-1198; Proposed Interagency Guidance on Overdraft
Protection
Dear Mr. Feldman:
Thank you for allowing us the opportunity to comment on the proposed
Interagency Guidance on Overdraft Protection. First Hawaiian Bank
is a $10 billion FDIC-regulated institution with 56 branches in Hawaii,
3 in Guam and 2 in Saipan. We offer a full line of banking services
including numerous deposit, loan and credit card products.
We understand that our
customers will periodically be faced with an inadvertent overdraft.
To assist in these situations, we offer
an overdraft line of credit, allow customers to link accounts and
may approve an overdraft on an account. The decision to pay an overdraft
item is based on various factors and the customer’s relationship
with the bank. To assist with the high volume of overdraft situations,
the bank created an internal decision-making tool that makes preliminary
decisions on whether to pay or return an overdraft item. When the
amount of the overdraft exceeds a specific dollar threshold, the
overdraft decisions are reviewed manually. Unless the bank has a
formal overdraft line of credit agreement or linked account agreement,
a customer may only withdraw available funds from an ATM and is not
allowed to overdraw.
When an overdraft occurs, the bank charges the same fee whether
or not the overdrawn check is paid or returned. In addition, the
customer is immediately notified of the overdrawn status and associated
fee.
Since the decision to pay an overdraft item is a customer service
decision and discretionary, the bank does not advise customers of
this process, does not advise customers of an acceptable overdraft
limit and does not advertise this service.
The following are our comments to the proposed guidance:
Consistent Terminology and Clear Definitions.
The guidelines should include consistent terminology to describe
an Overdraft Protection Program (“ODPP”) and a clear
definition to explain what an ODPP would include. The ODPP definition
should include marketed programs that set limits for each account
and communicate those limits to customers.
In addition, there should
be consistent terminology to describe internal decision-making
tools (“IDMTs”) that banks often
use to review overdrawn accounts. IDMTs would include situations
where the bank has established an internal procedure to determine
whether to pay or return an overdraft item. The internal procedure
is not conveyed or marketed to the customer.
The selected terminology should be clearly defined and used consistently
throughout the guidance.
Proposed
Guidance Should Only Cover ODPP’s (not IHP’s).
We believe the guidance should only apply to ODPPs since this appears
to be the area of concern. We are not aware of any credit (safety
and soundness), legal, reputation or other risks associated with
IDMTs and we are not aware of any complaints related to the fact
that a check was paid rather than returned when an IDMT is used.
Requiring banks with IDMTs to follow these guidelines could result
in the unintended consequence of either discouraging banks from
offering this service, or compelling all banks to offer ODPP’s
rather than using IDMT’s in order to meet the competition.
Subjecting banks that only use IDMT’s to this guidance will
result in unnecessary burden in time and costs with little, if
any, additional benefit to the consumer.
Thank you for consideration of our comments. As a bank that uses
an IDMT rather than an ODPP, we feel strongly that steps taken to
address your concerns about ODPPs should not affect banks that do
not offer ODPPs.
If you have any questions or would like additional information,
please feel free to contact me at 808-525-5111.
Sincerely,
FIRST HAWAIIAN BANK
Joyce W. Borthwick
Senior Vice President & Chief Compliance Officer
Corporate Compliance Division
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