By Cheryl Lawson, EVP, Compliance Review
“Doing the right thing” has become synonymous with “doing the hard thing.” After all, eating healthy, saving money and exercising regularly are all things that most people would agree are the “right” thing to do—but they’re often not so easy. For banks and credit unions, doing the right thing—following compliance regulations to a “T”—can often seem like a time-consuming burden; however, it’s actually much easier than the alternative.
Don’t believe me? Imagine the hassle and costs that could come from increased compliance scrutiny and lawsuits related to a non-compliant overdraft program, not to mention the bad public relations and loss of accounts that could occur. Wouldn’t it have just been easier to make sure you were “doing the right thing” from the beginning?
“The time is always right to do what is right.” - Martin Luther King, Jr.
When I talk to banks and credit unions about why they’re not using a third-party expert to manage their overdraft program, I usually get one of two responses.
The first is, “We don’t need help. We have sufficient resources.”
It’s great that you have faith in your compliance officer—you should. But individuals in compliance positions have an ever-expanding number of matters they need to stay up to date on, and the truth is nobody can be well-versed in everything going on in the industry. It’s not a sign of your staff’s incompetence to hire an outside vendor to oversee your overdraft program, nor is it a duplication of resources; rather, it’s a way to support your compliance officer so they can focus on the areas that need their attention.
Don’t forget, taking your eye off compliance—even for a little while—can financially impact your institution. A few years ago, one community bank unintentionally violated Regulation E by charging overdraft fees to account holders who hadn’t opted in. Though the bank eventually caught the issue, it ended up having to refund years of fees totaling over $40 million, along with fixing the credit reports of affected consumers and paying a multi-million-dollar fine.
“Doing the right thing” by having additional compliance support surely would have been easier than the expensive, time-consuming, reputation-damaging ordeal!
The second response I usually get for why there isn’t a need to hire an overdraft expert is, “We had a consultant at one time, and it helped, but then we decided to run the program in-house.” The problem with this is, you’ve essentially put the burden back on your own team to keep up with every single compliance issue related to overdraft—in addition to everything else they’re involved with.
What once was acceptable could now be out of date if you don’t have someone constantly updating and advising you on the latest regulatory and best practices developments. A credit union that once engaged with a third-party overdraft expert but later decided to go it alone ended up as part of a class-action lawsuit because its disclosures didn’t reflect the current best practices. With the oversight of an overdraft expert, it is likely the issue would have been caught during the regular review of communication materials.
Again, ensuring continuous adherence to regulations could have saved a lot of time and resources.
"With integrity, you have nothing to fear, since you have nothing to hide." - Zig Ziglar
“Integrity” is the essence of a transparent and fully disclosed overdraft program. You’re doing the right thing by your account holders when you provide them with all the information upfront; and you’re also doing right by them when you follow industry expectations.
Make things easy on your financial institution by having a clearly communicated overdraft program, viewing it as a service and focusing on the account holder experience. The alternatives—undisclosed information, focusing only on income generation, and rule violations—most often only result in negative outcomes.
“Next to doing the right thing, the most important thing is to let people know you are doing the right thing.” - John D. Rockefeller
Some instances of charity, integrity or goodwill call for anonymity, but not all. For your overdraft program, it’s okay to let your account holders know you’re doing right by them. Making sure they understand a program, answering their questions in a clear and consistent way, and pointing out the ways you serve their best interests can all help calm financial worries and create trust in your overdraft program.
Just make sure that you’ve got access to the best compliance support and a 100% written compliance guarantee to back you up, so when you do the right thing … it’s also the easiest thing.
JMFA is one of the most trusted names in the industry. Whether it’s recovering lost revenue, uncovering new savings with vendor contract negotiations, creating more value, serving account holders better or delivering a 100% compliant overdraft service—JMFA can help you deliver measurable results with proven solutions. To learn more, please contact your local representative or call us at (800) 809-2307.