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Obtaining Reg E Decisions is Essential, but Financial Institutions Must do it Properly

Posted by Jeff Harper, President, BSG Financial Group on Nov 6, 2017 10:24:32 AM

 

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.

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Topics: Courtesy Overdraft, Debit Denials, Overdraft Compliance, Reg E

Industry Leader Touts Future of Courtesy Overdraft Programs

Posted by W. Barrett Nichols, founder & CEO on Sep 13, 2017 11:27:32 AM

While reading the latest installment of the Temenos Group blog, the old advertising line, "When E.F. Hutton talks, people listen," came to mind. Temenos is one of the largest producers of software for banking and finance, with over 2,000 clients across the globe, including 41 of the top 50 banks. The company, which spends 20% of its sales annually on R&D, is well-respected for its deep industry knowledge that helps customers stay ahead of a changing marketplace. When Temenos comments on an industry trend, people tend to listen. Or they should.

What the company had to say about courtesy overdraft programs may cause your financial institution to re-evaluate the solution you currently offer... or make you scramble to get one in place.

New Call-to-actionIn a nutshell, Temenos Chief Compliance Advisor, Blair Rugh, stated emphatically in the blog post:

"If you do not offer a courtesy overdraft program, I suggest you reconsider your decision.

Maybe your initial decision was correct for your institution at the time it was made, but possibly now that the dust has settled and the issues are better defined a different decision would be more appropriate."

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Topics: Responsible Approach, CFPB, Overdraft Compliance, Dynamic Overdraft Limits

Re-Emerging Overdraft Programs Must Focus on Service, Responsibility

Posted by Jeff Harper, President, BSG Financial Group on Aug 28, 2017 7:50:56 PM

The conversation about overdrafts has been somewhat non-existent the past several months as community banks and credit unions patiently wait for impending compliance directives, changes within the CFPB and an uptick in the economy. It seems now–with positive movement regarding all these concerns–it’s time to start talking about the opportunities overdrafts represent and the best way to seize them.

CUES recently reported that “with The Financial Choice Act likely to pass Congress, compliance on overdrafts appears headed for less restriction.” This assertion is based on the fact that part of the proposed Financial Choice Act dismantles key parts of Dodd-Frank, which created the Consumer Financial Protection Bureau (CFPB), whose role will be redefined under a new name. The act–among other improvements–“removes the board’s opaque and ill-defined unfair, deceptive, or abusive acts and Practices (UDAAP) authority,” while still emphasizing consumer protection. The bill passed in the House on June 8 and goes to the Senate next for consideration.

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Topics: Responsible Approach, CFPB, Overdraft Compliance, Dynamic Overdraft Limits

The Outlook for Automated Overdrafts Seems Bright

Posted by Jeff Harper, President, BSG Financial Group on Nov 28, 2016 6:28:51 PM

Now that the election is over, there is much speculation about how a Trump presidency will impact our industry. Most everything we read is positive, especially about the future of automated overdraft programs. 

In particular, we are encouraged by:

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Topics: Overdraft, Compliance, CFPB, Overdraft Compliance, Overdraft Provider

Dynamic vs. fixed overdraft limits: And the winner is…?

Posted by Jeff Harper, President, BSG Financial Group on Jun 21, 2016 10:25:07 AM

In this corner… the Contender, Fixed Limits, challenging the formidable upstart, Dynamic Overdraft Limits….

Indeed it may seem like you’re in a boxing match when deciding which type of overdraft limits you will offer in your automated discretionary overdraft program.

Both types of limit-setting strategies enable your institution to automatically allow or disallow overdrafts for those account holders who utilize your service.

The Contender:
FIXED LIMITS provide a “one-size-fits-all” approach that is determined at account opening. All account holders who qualify to be in the program, receive the same overdraft limit; OR the limit varies based on account type (i.e., $550 for Free Checking and $750 for Premier Checking).

The Challenger:
DYNAMIC LIMITS are calculated automatically based on a myriad of account holder data points, including specific deposit and overdraft activity, related balances and more. This data enables your institution to establish a risk profile for each account and assign individualized overdraft limits based on the account holder’s ability to repay the overdraft and fees at any given time.

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Topics: Overdraft Compliance, Overdraft Management, Dynamic Overdraft Limits

Coming Clean on Overdraft

Posted by Michele Rehm, Marketing Manager on Mar 23, 2016 7:00:00 AM

Reprinted with permission of the Financial Managers Society. Original publication date, March 22, 2016.

For the most part, it’s hard to find anybody outside of the banking industry with something nice to say about overdraft protection.

With the Consumer Financial Protection Bureau (CFPB) long beating the drum for some type of reform, most takes on the topic continue to run along the lines of a recent New York Times article focusing on consumers racking up big charges while banks laugh all the way to, well, themselves with a pile of big fees.

While few institutions will dispute the notion that overdraft does, in fact, represent a solid (if not spectacular) source of noninterest income in an environment where every such dollar matters, 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.

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Topics: Overdraft Protection, Overdraft Compliance, published articles, FMS

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