Banking Law

Never one to pull a punch when a haymaker to the chin is available, IBC CEO Camden Fine recently expressed the frustration of many community bankers over the recent FDIC Final Guidance on Overdraft Payment Programs. One thing that appears to have Camden really steamed is that the guidance "doesn?t include a single recommendation from the community banking industry." Camden doesn't stop there, however. He's just getting started.

Talk about the nanny state gone wild. This is an Orwellian nightmare.

OK, so stop holding back and tell us what you really think, Cam.

Come to think of it, however, "Nanny State Gone Wild" might make a heck of a series on Fox.

Especially irritating to Mr. Fine and many of community bankers he represents is the requirement that banks monitor their customers who use overdrafts six times over a rolling 12-month period, contact them, and  discuss alternatives to overdrafts with them. Based upon conversations (in some cases, unsolicited by me) I've had with customers who use overdrafts as a matter of common banking practice (and which I've previously discussed), I predict that many of them are going to react to such contacts not as a Care-Bair-Knows-Best might expect, but as anyone who knows anything about how human beings who exist outside the confines of an ivory tower operate in an actual banking environment would expect: they'll tell the bank that contacts them to stick it in their ear.

As we pointed out in September, bank customers who are offered a choice are choosing  by a wide margin to opt in to overdraft protection. Camden also notes this fact and then gets to the "bottom line."

The bottom line is this: Banks began offering overdraft protection to meet customer demand. And now the government is getting in between a product the customer wants (and in many cases needs) and the bank.

We all know why "the government" (in this case, the FDIC) is getting between the customer and the product. The FDIC thinks that the average customer who uses overdrafts on a regular basis is too stupid to understand what he or she is doing and, therefore, needs the federal government (or, in this case, an agency of the federal government that was established to insure the deposits of certain financial institutions but that has morphed over the past four and one-half years into a consumer advocacy special interest group) to make sure that they are properly fed, bathed, burped, clothed in warm jammies, tucked in, and kissed goodnight.

"Mission creep": in D.C., it's an occupational hazard. In this case, it's also one more reason for national banks and Fed-member state-chartered banks to thank their lucky stars that the FDIC isn't their primary federal regulator.