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."
We are pleased to announce that Springfield, Ohio-based IH Credit Union has selected BSG Financial Group as its partner in managing its courtesy overdraft service.
According to credit union officials, IH Credit Union ($314 million in assets) selected BSG Financial Group and its CourtesyConnect®/CourtesyLimit™ software—displacing an incumbent third-party vendor it had engaged for 12 years—as a way to streamline overdraft management processes, while continuing to provide the same or better service that members have come to expect from the credit union.
In addition, the credit union sought to improve the methodology of setting overdraft limits in order to better meet members’ short-term liquidity needs. “We had been using a ‘one-size-fits-all’ approach to overdraft limits, but felt we should be more responsive to changes in our members’ financial situations," said Robb White, Chief Executive Officer of IH Credit Union.
Since the 2010 Amendment to Regulation E (Reg E), banks that want to offer and charge for overdraft coverage on ATM or one-time debit card transactions have been required to obtain affirmative consent from customers before charging an overdraft fee for extending overdraft coverage for these transactions. Many consumers have realized the benefits of opting into overdraft coverage when using their debit card, including avoiding embarrassment at POS and obtaining goods and services, like gas and groceries, at the time they need them.
However, a large percentage of customers—as many as 80% according to the Consumer Financial Protection Bureau (CFPB)—have not opted in (and/or made a decision about opting in) to their institution’s overdraft coverage for debit card transactions. For safety and soundness purposes, most institutions do not provide an overdraft limit for card channel transactions on accounts without a Reg E opt in decision. This results in a denied transaction whenever a customer attempts to access more than their available balance. It can be very frustrating for a consumer, especially a new customer, to have a POS transaction denied when attempting to use a debit card. The consumer receives no immediate feedback informing them that the transaction was denied due to insufficient funds because they didn’t opt-in to Reg E.
Heading into 2018, Service Fee Income, Digital Solutions and Deposit Growth will be high priorities for financial institutions according to a recent BSG Financial Group poll of bank and credit union executives. Further, 90 percent of the respondents say they plan to embark upon the process of budgeting and planning for these strategic initiatives within the next 30-60 days.
Is your institution on track to identify areas of profitability and growth before year end?
BSG Financial Group's "Revenue Strategies for 2018: A Video Series" introduces financial institutions to three proven income-building solutions, which incorporate innovative technology along with validated best practices and procedures.
Each 15-minute video in the series provides a brief overview of one solution that provides increased revenue and enhanced customer service–without taxing technology or compliance resources. See Strategy #1: Digital Lending below.
To watch the videos, go here.
This article was originally published on CBInsight.com.
In today’s highly digital, data-driven environment, account holders have come to expect personalized attention from the company’s they engage, including their financial institution. They want businesses to provide relevant and desirable services and solutions based on their needs and they often switch companies when communications are generic and impersonal.
Unfortunately, seventy-nine percent of consumers consider their relationship with their financial institution to be purely transactional, according to an Accenture Consulting study. However, by delivering more meaningful engagement, banks and credit unions can generate better response rates, as well as increase loyal account holder relationships. And thanks to modern technology, this one-to-one communication can be created dynamically based on your account holder’s account activity and a myriad of other data points.
Today the customer is king.
No matter what product or service you market, disappearing after the sale hurts customer retention and future sales, as news of your poor service spreads. The experts say it’s easier to keep a client than to find a new one, and we couldn’t agree more. Successful companies act as a ‘partner’, not merely a vendor, to their clients.
But how do you know you are succeeding?
One tried and true way is to proactively ask for feedback from your customers in order to gauge your performance. Oftentimes it is the simplest surveys that elicit the most helpful responses, as we found out after we re-vamped the way our clients rate us after a service request. Now in less than 30 seconds, customers answer one simple question in an online survey (which they receive upon completion of support requests) and submit supplemental comments or suggestions, if necessary.
An August 17, 2016 article entitled, “Disparate impact studies especially tough on dynamic matrix systems,” caught our attention. The article, in our opinion, attempted to cast a negative light on “overdraft matrix systems” or overdraft processes that can cause a customer’s discretionary overdraft limit to change from time-to-time based on the risk profile of the customer.
Most financial institutions acknowledge that overdraft fees represent a remarkable source of non-interest income. What may not be clear to some is the fact that overdraft privilege programs are more than just a source of revenue. Recent data suggests that the service offers as much of a benefit to the consumers who use it as it does to the institutions that provide it.
Consumer Financial Protection Bureau (CFPB) director Richard Cordray has said on many occasions that his agency is not looking to do away with overdraft services (but is instead leaning toward minor changes in how institutions manage the programs). As such, it doesn't appear overdraft programs are going away.
So how should community institutions view overdraft privilege in the current environment?
You might answer, 'Yes’ if you saw the headline, "CFPB Urges Banks to Ditch Overdraft Accounts," from an American Banker article published Feb 3, 2016.
However, if you read the entire article, you found that The Consumer Financial Protection Bureau (CFPB) director Richard Cordray was merely asking financial institutions—in a letter he sent to the nation's 25 largest retail banks—to consider providing products for consumers who cannot obtain checking services, and to "lower the bar" when it comes to screening them for those products.
So, you're waiting for the CFPB to decide about overdrafts?
And why is that?
- Is it because you are completely confident you are operating an up-to-date and properly managed overdraft program?
- Or perhaps you are positive your program is compliant?
- Or maybe you have no doubt that your current program is properly serving your accountholders (whose accounts generate a large percentage of your non-interest income)?
If you cannot answer a resounding 'YES' to each of these questions, NOW is the time to ensure your overdraft program is optimized to handle to whatever the CFPB hands down. The fact is, there have been significant changes in overdraft management since most financial institutions implemented or even last reviewed their overdraft programs. Today's solutions—and providers—far exceed yesterday's options.