There has been a plethora of news stories lately about the intentions of the Consumer Financial Protection Agency (CFPB) to roll back banking regulations, but this one from American Banker is a must-read: "From overdraft to HMDA, rulemaking has new look at Mulvaney’s CFPB. The article explains that acting CFPB director Mick Mulvaney has "overhauled the agency’s spring agenda, dropping several long-time goals of his predecessor, including a rule on overdraft programs."
According to the article:
Financial institutions had preemptively opposed further efforts to crack down on overdraft programs, arguing that rules that took effect in 2010 which required customers to opt-in to such programs had proven effective. But former CFPB Director Richard Cordray had continued to sound the alarm on overdraft, suggesting that customers weren’t necessarily aware of the risks involved.
The agenda’s lack of mention is a concrete sign that Mulvaney is not interested in pursuing that course, which many had expected given his desire to ease regulations.
Mulvaney's actions should signal to financial institutions that the CFPB is no longer a reason to avoid offering a responsible discretionary overdraft program or updating current systems. With more than six months left in 2018, a re-vamped overdraft program could potentially help your FI meet budget figures while tangibly improving customer satisfaction.
With the right software and procedures in place, financial institutions can now customize their overdraft service by identifying changes in account holders' financial behavior—including their ability to repay an overdraft and its corresponding fees—and adjusting their access to the program on a daily basis.
Tools now exist to assist financial institutions in tracking failed NSF debit card transactions, communicating to account holders causes and offering solutions. This is a significant enhancement given the fact our client data shows 57% of all daily transactions are ATM or POS debit transactions. Automation advances also include robust reporting that assists in justifying overdraft program parameters and procedures to outside third parties.
As Temenos Chief Compliance Advisor Blair Rugh recently concluded: "Now that the dust has settled and the issues are better deﬁned... if you do not oﬀer a courtesy overdraft program, I suggest you reconsider your decision. Just follow all of the rules... and enjoy the results along with your [account holders]."
The key is, of course, to align your institution with a reputable overdraft services provider that has a commitment to compliance, consultation and a long list of satisfied clients that have received positive feedback from examiners.