JMFA OVERDRAFT PRIVILEGE®
 COMPLIANCE CORNER
MAY 2021

   Cheryl Lawson
   Executive Vice President
   Compliance Review
Overdrafts Are Still Critical
Three areas to bring back into focus


Financial institutions are opening their doors to consumer account holders again after more than a year of “appointment-only” operations. Many consumers have been fully vaccinated for COVID-19 in the last few months. They are eager to return to lifestyles that include eating out, shopping, and various forms of travel and entertainment. For some consumers, that means they are going to be using your overdraft solution again, perhaps after a multi-month hiatus.

During the COVID-19 pandemic, incomes have been dramatically impacted in many households.  Moreover, community banks and credit unions have consistently assisted many consumers by handling their stimulus deposits and addressing their financial needs—including reducing or waiving fees. Those accommodations have given your account holders even greater confidence in your organization. By reminding them of how your overdraft solution works and supporting their effective use of the service, now they can return to ‘business as usual.’  Your overdraft program’s clear documentation is more important now than ever. Here are three key areas you’ll want to keep in focus:

  1. Regulation E
    When consumers are making debit card purchases, you want them to be able to complete each transaction without being declined. If you have consumers that have not yet Opted-In for Regulation E, this is a great time to remind them through letters or phone calls that you can pay debit card overdrafts with their affirmative approval. Scripted phone conversations that fully communicate the program’s details and allow consumers to ask any questions can help increase your overall opt-in percentage rate. 

     

  2. Technology
    Over time, core processors can be revised, creating unintended changes to your overdraft program, making it work differently than expected. An example is when a ‘patch’ changes the posting sequence, or an upgrade disables your Reg E Confirmation Letters. Now is a great time to re-test your operations just like the program was brand new. Create test accounts and confirm that your disclosures truly reflect how your program operates. If you find something to correct, fix it now.  Inquire whether your core vendor has a solution to the “authorize positive, settle negative” issue and if it exists, arrange for its installation. This is one of several areas that have been the basis for several lawsuits.  Rather than paying lawyers to defend you, put the authorize positive, settle negative technology into place as soon as you can.

     

  3. Payday Lenders
    According to a recent study, Payday Lenders have been taking overdraft volume away from banks and credit unions. While your branches were closed to consumers, the payday lenders increased their marketing, capturing the business you will want to reclaim. Now is the perfect time to re-educate your consumers about the many ways you can help them. Your transfers, lines of credit, and overdraft services are all in place to support their occasional financial shortfalls. Ensure that they know what you can do and help them make the best possible use of those services.

 

Taking the time to refocus managing your disclosed overdraft solution will demonstrate your commitment to service for your account holders and much more. 


 
 
If you have any questions or comments about the information provided in this month's compliance corner, please contact your JMFA Relationship Manager or email us at compliance@jmfa.com.

As a JMFA OVERDRAFT PRIVILEGE® client, this information is provided in accordance with our contractual agreement.

 
John M. Floyd & Associates, Inc. | 1415 North Loop West, Suite 500, Houston, TX 77008
800-809-2307 |
support@jmfa.com |
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