CUInsight Interview: Three questions with Cheryl Lawson


Cheryl Lawson |

Overdrafts and Courtesy Pay FAQs

Here are three frequently asked questions about overdraft compliance. Watch or keep reading for the answers to help your credit union offer a responsible overdraft service for your members.

1. Do consumers have a need for overdraft services?

Our communities are made up of all different types of households. Some people make plenty of money, others don’t earn quite as much as they need in order to get by. Research shows that 3 in 5 Americans are living paycheck to paycheck; and 77% of Americans report feeling anxious about their financial situation. So, there is definitely a need for consumers to be able to turn to their financial institutions for support in the event of a short-term need.

Also, small overdrafts represent no significant loss to financial institutions. But offering the service does build a brand relationship and loyalty. And that’s extremely important for community banks and credit unions, whose account holders have come to see them as a partner in their financial health.  And as a partner, you don’t want to turn someone away at a time when they may have a short-term need.

2. What should community financial institutions consider when evaluating their overdraft position?

Your overdraft solution must be totally compliant. It has to address everything the examiners are going to ask for—and more.

It also has to address the needs of consumers. After all the changes in the industry in the past 15-20 years, we finally have a much clearer direction from the FDIC, NCUA and other agencies on exactly what they want to see in strong overdraft programs. And that is: transparency, consistency, fairness, making sure that consumers have the ability to turn it off, etc.

The pressure is on financial institutions now to not just provide an occasional service, but to consistently ensure that consumers are benefiting from it (and not harmed in the process).

Speaking from years of personal experience, the past year has seen more activity in the overdraft space than pretty much any other time I can recall. Authorize Positive, Settle Negative (APSN) and Re-presentment fees are being heavily scrutinized. Your program must follow best practices to a ‘T.’ You can’t do it halfway or fix it as you go. A standard review won’t deliver the perfection you need. The optimal solution is to work with a partner whose sole focus is to monitor and manage every single aspect of your program, 24/7.

When you stay ahead of the game, and you know you’re providing a value-adding, relationship-based service to your account holders, you don’t have to sweat regulatory exams or industry changes.

3. What are the challenges FIs are facing when navigating regulatory expectations?

Currently, the biggest focus continues to be centered on transparency, fairness and consumer costs. In particular, APSN and re-presentment fees have examiner and litigation ramifications. Based on experience we’re able to very nimbly respond and assist our clients so that they’re ahead of the game and they get everything done before the examiner walks in the door.

ADVANTAGE provides a 100% compliance guarantee for our overdraft program, which no other industry partner does. And we’ve done that for years because we know everything that needs to be included in your program and we ensure that you implement our recommendations.

What does that guarantee mean? If an examiner walks in and says, “You’re not doing something perfectly,” it’s ADVANTAGE’s dollars that are on the line. We pay any fines stemming from written communication penalties. The telling news is, in 25 years we haven’t had to pay any fines, because we’ve always delivered a 100% compliant solution.

Overdrafts are not the enemy. Your credit union or community bank has members who want and need this service from time to time, to keep their lives moving—and you want to be there to assist them. ADVANTAGE is here to help you deliver a non-discriminatory, fair and compliant service they can rely on.

Our solutions are tailored to each financial institution we work with—it’s not a kit, you can’t mail it in a box. We spend time one-on-one with each client to build a lasting partnership. In the end, our goals are the same as yours: to make the marketplace better and to support households through thick and thin.

To learn more, download our whitepaper titled, “How valuable is overdraft privilege to consumers?“

Are you confident your overdraft program is operating at 100% compliance perfection? If not, ADVANTAGE, powered by JMFA is here to help you. Contact us to start the conversation today.


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