I am working on updating our overdraft charge-off procedures. We do not have an Overdraft Program under Regulation E. For other banks in this situation, did you still use the Overdraft Guideance from 2005 as far as requiring accounts be charged off within 60-days and charged against the allowance for loan losses.

Thanks!

The 2005 Guidance refers back to Generally Accepted Accounting Principles that have been in existence long before a formal overdraft program ever entered the mind of a non-interest income hungry bank.

60 days is the standard (unless you are a credit union in which case it is 45.) Your bank will have safety and soundness criticisms if accounts are overdrawn more than 60 days. This is more than a compliance issue.

Does anyone have a Best Practice on how they handle ODP loans? Does anyone move the ODP balance to the DDA account it is tied to and then send for collection?

Does anyone move the ODP balance to the DDA account it is tied to and then send for collection?

What do you mean move the balance? That is were it exists - does it not?

Does it? It shows up as a separate product on our system. Same account number as the checking account. It is charged interest.

Perhaps I need to reclarify. What operational procedures should be included in a charge-off of the account and what area should be responsible?

Well, this is really going to depend on the specific systems that you are running and the internal structure of you bank. There is not really one answer to your question. The steps you have to do to charge off the DDA account correctly so that it hits your ALL and goes to your shadow accounting system for further collection accounting and who is involved in that process is really institution specific.

We appear to have oversight that when the DDA side is charged off the loan side is not. I was just looking for a Best Practice in how other banks handle this process.

OK - I am confused - what loan side?

Our ODP program transfers $100 to the checking acct when it is OD. It has the same acct # as the checking acct. Is that not the same? We call it an ODP loan/line.

OK - when people say ODP - that is the acronym common used for a overdraft protection program. What you are talking about is an actual line of credit. So you are really saying that you have a line of credit tied to the DDA account that is fully advanced to its loan limit and in addition to that the DDA account to which it is tied has also been overdrawn for a period of more than 60 days. I got it now.

In guess you need to get together with someone from the loan side and figure out the communication necessary to get them both charged off at the same time. If you can't collect a DDA overdraft, the chances of collecting on the loan is probably questionable and the loan should also be charged off at that time.