After a year filled with regulatory activity tied to Dodd-Frank Act requirements for mortgage rules, auto loans and prepaid cards, much anticipation remains regarding how regulatory changes will affect products and services such as payday loans, debit collection and overdraft protection programs. In a recently announced rulemaking agenda, the Consumer Financial Protection Bureau (CFPB) outlined delays in proposing new rules for these items, pushing the timeframe for any announcement well into 2015. For overdraft protection programs, this action represents the third such delay since last year and could slow any regulatory action until July.
And while these delays in final ruling decisions may have caused financial institutions to push back plans to implement an overdraft strategy, the need for access to low-cost solutions for accessing emergency funds remains an issue for consumers with limited credit options.
As regulators continue to analyze the data they collected in their 2013 study of the type of overdraft practices used in large banks – such as transaction reordering, opt-in disclosures for electronic transactions and excessive fees – community financial institutions need a strategy for preserving a reliable source of non-interest income while providing account holders with the valuable services they need to maintain control of their finances. A fully disclosed overdraft program can benefit both institutions and their account holders when it addresses regulatory concerns with the following best practices:
- reasonable, communicated fees;
- clearly established overdraft limits;
- transaction clearing policies that avoid maximizing account holder overdrafts and related fees created by the clearing order;
- the ability to easily monitor excessive usage; and
- communications materials that outline alternative financial products that more appropriately fit the needs of excessive overdraft users.
In support of our clients, JMFA’s compliance counsel Oliver Ireland continues to monitor the work of the CFPB and provide insight into regulatory changes as they occur. Executive Vice President for Compliance, Cheryl Lawson, visited with the CFPB recently and said “Much work remains to be done as the CFPB continues to analyze the overdraft environment. This delay will enable them to have even more data and knowledge about the strategies which enhance consumer use of overdraft solutions. As the super-regulator, we want them to ‘get it right’.”
As the premier provider of fully-disclosed overdraft programs for more than 25 years, JMFA remains committed to providing the best solution for financial institutions and the consumers they serve. For more information on JMFA Overdfrat Privilege®, visit www.jmfa.com or call (800) 809-2307.