Waiving Overdraft Fees for Board of Directors

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Question:

During our annual internal audit of Reg. O, we discovered that overdraft fees are being waived for the board of directors. The overdrafts were under $1,000 and the account was not consecutively overdrawn for 5 days or more. At first, we felt that we could defend this by proving that our BOD is in similar circumstances as other depositors that we waive overdraft fees for. Management has decided that proving these "similar circumstances" may not be a risk we want to take with examiners. How should we handle this violation? Should we have the board members that are in violation pay the fees that were waived? Or should we implement training and awareness to ensure this violation does not happen again?

Answer:

Answer by John Burnett: You won't, in my opinion, "unring the bell" by getting your affected directors and executive officers to fork over the waived fees. The violation took place and can't get "expunged," but you can mitigate the damage by getting them to "pay up."

Change your policy and procedures quickly to discontinue the practice of waiving the fees for executive officers and directors, and ensure that appropriate individuals are retrained so that you don't continue the violations.

Hopefully, the amounts involved won't be large, and you won't have trouble convincing the directors that it's the right thing to do to pay the waived fees.

Answer:

Answer by Ken Golliher: If it was a mistake, there is no reason your directors should benefit from it. The closest you can come to making things right involves your directors ponying up their overdraft fees to the penny, now.

First published on BankersOnline.com 9/12/11