When management of Dane County Credit Union in Madison, WI, began looking for an automated overdraft program, they were interested in having the ability to replace the daily manual review of accounts by the program administrator with streamlined overdraft processes and procedures. They found such a solution with JMFA OVERDRAFT PRIVILEGE®, a fully disclosed program which would allow them to specify program parameters within their core processing system to determine member eligibility and verify account overdraft limits. After implementing the program with support from JMFA and experiencing positive results, they decided that they could manage the program on their own.
However, after a while they realized that their performance wasn’t what it could be. “After the program was fully implemented, we got used to running it and thought we knew how to be successful our own,” said Shay Santos, chief financial officer of the $182m institution. “But the truth is we were really stuck on our manual processes and I think that turned out to be a hindrance to our success.”
JMFA OVERDRAFT PRIVILEGE® Redux
In November 2015, Jon Lowrey, Dane County CU CEO, met with JMFA Regional Director Susan Prell and discussed the credit union’s overdraft program results. In the years since the institution’s last contract engagement with JMFA, Regulation E had been put into place requiring members to opt-in to overdraft coverage on ATM and one-time debit card transactions. The credit union had decided not to expand overdraft coverage to e-channels and Prell explained that the institution was losing quite a bit of revenue from that decision.
She pointed out that providing members with fully-disclosed opt-in overdraft protection on electronic transactions was a compliant way to increase revenue, while providing members with a valuable service to avoid having those transactions denied at point of sale. Following that conversation, Lowrey spoke with a few JMFA credit union clients that verified the company’s successful track record and then decided to re-engage with JMFA OVERDRAFT PRIVILEGE®.
Consistency is key to a successful overdraft solution
Based on the challenges they had faced when maintaining the overdraft program on their own, it was very important for Dane County CU leadership to have a sustainable solution going forward. Since renewing the engagement with JMFA, the credit union and its members have experienced positive results from JMFA OVERDRAFT PRIVILEGE® in several areas, including:
More efficient program management
Before re-signing with JMFA, multiple credit union staff members managed the overdraft program. JMFA’s consultants recommended reducing this number to streamline processes. Santos explained that while the previous staffing strategy worked fairly well, there were times when having different parts of the program spread out among multiple people – all with other work responsibilities – made it difficult to manage in a timely manner. By following JMFA’s suggestion to designate one administrator and a supervisor to oversee the program, the credit union has seen an overall reduction in the time spent maintaining the program and an increase in efficiency.
Another important aspect of maintaining a successful overdraft program is watching the numbers. According to Santos, the in-depth reporting provided by JMFA’s PRIVILEGE MANAGER CRM® software, helps Dane County CU to stay on top of its game. “The reports are easy to access and provide a great deal of information each month that helps us to stay on track with our program results, just like we do with other key performance ratios,” he said. “What’s more, our JMFA representatives monitor our results and if there is ever an area that needs improving, they will call and say, ‘hey we need to talk about this and see why it is happening.’”
An abundance of staff training options
Two challenges that can have a major impact on an institution’s ability to effectively communicate with its account holders are regulatory uncertainty and personnel changes. That’s why JMFA OVERDRAFT PRIVILEGE® places a great deal of importance on staff training.
For Dane County CU, these training opportunities have been embraced by the entire organization. “The extensive training resources JMFA offers – for new employees as well as refresher sessions – provide the information our staff needs to stay current with program details and effectively explain the service to our members,” said Santos. “In addition to the scheduled on-site training, our JMFA contacts check in with us regularly and we know we can call on them if we ever have questions.”
Recently, the overdraft program administrator and program supervisor attended the JMFA Academy in Houston, Texas, for an in-depth, two-day session that details every aspect of program implementation and management, compliance and member service initiatives. “This was a great opportunity for our staff members since neither was directly involved in the program implementation,” Santos continued.
“They both appreciated the opportunity to step away from their daily responsibilities to focus on the presentations, and interact with JMFA consultants and clients.” Santos believes trying to run a successful overdraft program would be difficult without the type of training opportunities JMFA provides and he highly recommends the Academy.
Effective, compliant member communications
“People are often shocked when their account is overdrawn, so providing consistent communication is very important both for maintaining compliance and providing better service,” Santos said. “When members learn of their account condition, they call to ask what has happened. It is very reassuring when they understand what the overdraft program can do for them, as well as how important it is to be aware of their account situation.”
To ensure this is handled effectively, the credit union relied on JMFA’s expertise when it developed its member communications. “When we tailored our member letters, printed materials, scripts and website content, JMFA’s consultants reviewed the wording to make sure that our messaging was compliant,” he explained.
Unparalleled compliance expertise
Beyond compliant messaging, Dane County CU leadership also appreciates the on-going compliance guidance they receive from JMFA. “The company’s staff is well-versed in industry regulations and the compliance update bulletins they provide alert us to any changes announced by the regulatory agencies. This enables our operations staff and internal compliance folks to make sure we are doing things right the first time, said Santos.”
Improved service and performance results
When Regulation E was first implemented, the number of members opting in to overdraft coverage on ATM and debit card transactions was low because it was seen as something negative. “People didn’t understand the value of this type of coverage and I don’t believe we fully explained the benefits of opting in,” said Santos. Since re-signing with JMFA, credit union staff have gained a greater understanding of how the program works to provide members with a choice of using their debit card to take care of purchasing items they need when they don’t have the balance in their account to cover the cost. They can explain the benefits and responsibilities of extended coverage much more effectively and opt-ins have increased substantially.
As a result, the credit union has experienced a significant bump in non-interest income. Two months after implementing JMFA OVERDRAFT PRIVILEGE®, Santos noticed an annualized increase of $180,000 in revenue from the program. “Continuing revenue growth has helped us to offset a decrease in interchange income and has given the credit union more flexibility to provide a wider spectrum of products and services to our members. This has contributed to significant growth in asset size and staffing,” he said. “Without this increase, we would have had to reduce expenses or make up the revenue in other ways, such as charging higher interest rates on loans.”
Santos believes that the second go-round with JMFA has led to much better results because everyone is on-board and following the consultants’ recommendations. “From the beginning, JMFA didn’t just tell us what to do, they presented the steps we needed to take to maintain a successful, compliant program and explained why the changes were necessary. This greatly increased everyone’s understanding of the program and our staff buy-in has improved as a result,” he said.
“And while increasing non-interest income is a key element of the program’s strategy, there is a deeper vision for helping us to provide a fair solution to meet our members’ needs. This aspect of JMFA’s solution has been very important for us,” Santos continued. “We are now able to do a better job of explaining the overdraft program to our members – which I think is probably a big reason why the kick-off went so well – and why we are continuing to see great results. I don’t know that we would change anything about the experience.”
According to Santos, JMFA OVERDRAFT PRIVILEGE® has been a good solution for Dane County CU because it has allowed them to make improvements in the way they do business without having to change their business philosophy. “The program has enabled us to improve the quality and efficiency with which we process overdrafts from a staff and member standpoint, and ensures that we are in full compliance with current regulations,” he explained. “The quality of doing things right the first time through JMFA has really helped to bring a lot of value to our members. All things being equal, if we weren’t on the program and I knew this is what it would do for the credit union, we would do it again.”
When Santos hears industry colleagues who have reservations about implementing an overdraft privilege program, he wonders if the approach is what they don’t understand. “They are probably already charging fees on overdrafts, so why not do it right? I would tell them to ‘let the experts at JMFA show you how it’s done’.”