The current state of the overdraft industry can be summed up in one word, “WAITING.”
BSG Financial Group hears from some institutions that they are delaying offering an overdraft privilege program until the Consumer Financial Protection Bureau (CFPB) decides how financial institutions must manage consumer and business overdrafts.
This waiting reminds us of a quotation from the novelist Morris West who wrote, “If you spend your whole life waiting for the storm, you'll never enjoy the sunshine.”
We—banks, credit unions and service providers—have all been waiting for more than two years for the regulatory agency to finally announce its conclusions. Now it looks like mid-2018 before any material changes might occur. And even then, the changes recommended by Pew Charitable Trust (hired by the CFPB to handle the research aspects of their regulatory review) seem rather minor: revised disclosures, reasonable fees, and standard posting order.
In the meantime… while we wait, your account holders seek short-term liquidity elsewhere and your bottom line pays the price.
We know this to be true based on the data we see every day from our bank and credit union clients that have chosen to offer a courtesy overdraft program—despite possible changes by the CFPB. These high-performing financial institutions provide an increased level of service to their account holders and are not held back by what might happen down the road.
So how can an automated overdraft program improve account holder service? These are just a few issues that can be solved:
- ATM and Debit Card Transaction Denied Due to NSF–
Solution: Track account holders who have not responded with a decision regarding the important amendment to Regulation E. Many consumers are not even aware that they could be denied debit card and ATM transactions due to NSF unless they authorize your financial institution to allow them. How many important purchases do you deny because your account holders don’t know they have a choice?
- Denied Debit Card Transactions Despite Opting In to Reg E–
Solution: Adjust daily overdraft limits to match to your account holder’s ability to repay the overdraft and fees. Are your account holders experiencing denied transactions that they can actually afford? Or worse, are they overdrafting when they should not be allowed to? Federal guidance clearly requires financial institutions monitor the credit risk of each account holder and make plan adjustments “to ensure that credit risk remains in line with expectations.”
- Ill-timed or Irrelevant Communication–
Solution: Communicate with account holders in a personal and relevant way. For example, sending an email or making a phone call hours after a declined debit card transaction to educate the account holder why it occurred and offer overdraft management alternatives.
These issues are just a few that can be solved using a modern, automated program. Providing exemplary service does not rely on a decision from the CFPB. All it takes is a commitment to your account holders TODAY.