Why not take the necessary steps to offering a quality program?
Over the course of the past 10 years, there have been a half dozen regulations or proposed guidance on overdraft solutions initiated by regulators to build a structure for such programs. Each of these have defined what financial institutions could and could not do within the process of providing a solution for consumers who did not have the funds available to cover a purchase or cash withdrawal at the time the transaction posted to their account.
Consumer Financial Protection Bureau takes the lead
In 2011, the Consumer Financial Protection Bureau (CFPB) began collecting data relating to overdrafts from nine of the nation’s largest banks under its supervision. After analyzing the big bank data, the CFPB published two reports – CFPB Study of Overdraft Programs in June, 2013 and Data Point: Checking Account Overdrafts in July, 2014. Neither of which resulted in any overdraft ruling.
In his presentation of the 2014 Report, CFPB Director Richard Cordray stated, “I want to take pains to note that nothing in this report implies that banks and credit unions should be precluded from offering overdraft coverage. But we need to determine whether current overdraft practices are causing the kind of consumer harm that the federal consumer protection laws are designed to prevent.”
Core processor information requested
The most recent request from the CFPB was for anonymized data (from core processors FIS, Fiserv and Jack Henry) in order to “capture a generic, anonymous snapshot of deposit accounts and programs, the way overdrafts are processed and identified, how their duration is measured and how fees are assessed at the system level before any discretionary intervention.”
As a result of its extensive information gathering, on May 22 of this year, the CFPB updated its Rulemaking Agenda on overdraft rules. It stated, “The CFPB is also considering whether rules governing overdraft and related services are warranted, and, if so, what types of rules would be appropriate. A possible rulemaking might include disclosures or address specific acts or practices.”
As a proponent of fully-disclosed, compliant overdraft services, JMFA believes that by gathering additional information, regulators will be more knowledgeable on the issues as opposed to relying only on the data they gathered from the nine original banks. As a result, they will have the information they need to make a good rule.
What’s a credit union to do?
In the meantime, credit unions continue to need fully compliant revenue sources in order to provide their members with the services they want and need. And many consumers continue to need overdraft services to help them maintain their finances.
As the regulatory focus on consumer protection continues, credit unions must consistently inform their members of the costs of overdrafts, eligibility and the amount of fees charged per period and per year. A fully disclosed overdraft program – one that clearly defines the rules by which an account holder may access an overdraft service – gives consumers a reliable tool for maintaining control of their money. It also helps them to avoid less attractive choices for meeting their liquidity needs, such as resorting to high interest rate credit cards or relying on pay day loans.
The all-new JMFA OVERDRAFT PRIVILEGE® program provides a solution for both situations. Especially since many existing overdraft programs are outdated and obsolete due to changing regulations. JMFA OVERDRAFT PRIVILEGE® recovers lost revenue, offers a compliant program and value-added service for members. With all-new analytics, strategies, compliant communication materials and reporting and tracking, this program provides the tools to help credit unions restore the revenue and confidence in their overdraft service. Why not take the necessary steps to offering a quality program?
