Determining the right approach for supporting members who occasionally come up against liquidity needs can be complicated given the current environment of regulatory speculation. News coverage of how some banks and credit unions are modifying their marketing messages to change the perception of their overdraft program only adds further complexity. It has some credit unions taking a wait-and-see approach to evaluating their overdraft strategy. But why?
Failing to provide a fully disclosed service that could greatly benefit consumers when a financial need arises can negatively impact member service quality and your overall performance. All the noise about what regulatory and political pressure might be applied is not an obstacle—it is an opportunity for you to ensure you’re serving your members well.
Regardless of any new criticism, there will always be hot-button issues in our industry. Lending is another heavily regulated service or product. Banks and credit unions haven’t eliminated loans when lending practices have been under fire. No, because lending serves a need for consumers. And so does your overdraft program.
Regulatory expectations clarified
Like other products and services you offer, regulators have been looking at overdraft programs for years. Moreover, the last substantiative change they made to the rules occurred in 2010, when they introduced Supervisory Guidance recommending the implementation of reasonable and proportional overdraft fees, and a review of check-clearing procedures to prevent maximizing consumer overdrafts related fees through the clearing process.
Since that time, while legislators have made multiple attempts to increase legislation on overdraft services, all have been unsuccessful. What’s more, the current rule-making agendas for the Consumer Financial Protection Bureau (CFPB) do not include overdraft services—and haven’t for years.
An effective overdraft strategy builds trust
From a member service standpoint, it boils down to this: No one appreciates the shock of having an important payment returned or debit transaction declined—especially during an emergency. A fully disclosed, reasonably priced and consumer-focused overdraft service is precisely the kind of option that helps your members when they have a short-term need. It empowers them to take control of their finances. And it provides a reliable alternative for maintaining financial security when something unexpected occurs or they lose track of their account balance.
Does your overdraft strategy offer reliable financial peace of mind for your members? After all, consumers trust you to protect their money and deliver value in terms of products and services aimed at helping them achieve their goals.
Take the guesswork out of maintaining your overdraft solution
Access to expertise and the right resources is advantageous for addressing critical components of your overdraft solution for long-term success for your credit union and your members. Having a trusted partner that is laser-focused on running a fully transparent program really can make all the difference. With comprehensive recommendations based on your unique goals, program data and predictive models, you’ll gain confidence in your service offering while strengthening relationships with your members.
And, with ongoing support from a team of industry experts, you’ll be far ahead of those that take a wait-and-see approach based on regulatory speculation and confusion around “no fee” marketing strategies that are grabbing headlines.
While there are currently no imminent signs of new overdraft program regulations, our top priority is to advise credit unions on how to confidently maintain a fully transparent overdraft solution. And there is absolutely nothing alarming about that!
Contact us today for more information or to schedule a review of your overdraft strategy.