800-809-2307
Four Letters. Infinite Potential.
Does Your Overdraft Program Leave You Open to a Lawsuit?

Does Your Overdraft Program Leave You Open to a Lawsuit?

By Cheryl Lawson, EVP-Compliance Review

What’s the difference between a service-oriented, fully disclosed overdraft program that is clearly and responsibly presented to account holders … and one that is used solely to earn revenue, at all costs? In the case of TCF Financial Corp., it’s $30 million dollars and a major blow to its reputation.

You may have heard that TCF recently agreed to the large payment to resolve accusations that it misled its account holders about its overdraft program.

But here’s the interesting part: the bank did not technically break any compliance rules with their overdraft services. They did admit, however, that from 2010 to 2013, their account holders may not have fully understood their options for accepting or rejecting the service.

Misleading Instead of Serving

According to reports, TCF employed questionable tactics to get account holders to sign up for its overdraft program. The company allegedly asked new customers to accept the overdraft program at the same time they were accepting other mandatory terms and conditions related to opening an account.

Bank employees also reportedly asked account holders if they wanted their “TCF Check Card to continue to work as it does today?” A reply of “yes” was considered an opt-in.

So, technically, an opt-in was obtained … but certainly not ethically.

This unbalanced presentation of choices (not aided at all by the former TCF National Bank CEO naming his pleasure boat Overdraft) landed the bank in a whole lot of hot water.

Think it can’t happen to your bank or credit union? Without a fully disclosed overdraft program, it can.

Honesty — Still the Best Policy

There is a simple path away from trouble like what TCF experienced, though. For overdraft protection programs that rely on loopholes and sales tactics — or even just passive or uninformed opt-ins — to succeed, it’s essential to start looking at things from a service perspective.

Treat your account holders respectfully and responsibly by fully disclosing your overdraft program, explaining the terms and conditions thoroughly instead of going for the quick opt in. They’ll know the service is there if they need it, and they’ll use it if they so choose. Isn’t that better than surprising them with fees they didn’t realize they were agreeing to?

Being open and honest from the start will serve you well in the eyes of your account holders. 

Peace of Mind — It Can Be Guaranteed

On some level, TCF probably worked hard to make sure they stayed in compliance, despite the account holder confusion. Can you be sure that yours will perform well even if your examiner or unhappy account holders put your practices under a spotlight? 

Looking to an expert in overdraft services can help alleviate the worry. It’s important to find a partner that will provide the best possible overdraft option and experience to your account holders, while still increasing your non-interest income.

JMFA OVERDRAFT PRIVILEGE® offers a 100% compliance guarantee, providing regulatory updates to you and your program as needed. Plus, JMFA clients have access to on-site training and continuing education opportunities to help them get the most out of the program — responsibly.

All of these things combined help ensure that your institution is following best practices and regulations at all times. And that peace of mind means you’re always doing right by your account holders when it comes to overdraft services.

 


 

ABOUT THE AUTHOR
Cheryl Lawson is executive vice president of compliance review for John M. Floyd & Associates. She serves as JMFA’s principal compliance liaison for regulatory requirements of overdraft services, including consumer protection issues, and strategies that enhance safety and soundness. Learn more about Cheryl.

 

ABOUT JOHN M. FLOYD & ASSOCIATES (JMFA)
For the past 38 years JMFA has been considered one of the most trusted names in the industry helping community banks and credit unions improve their performance and profitability. Whether it’s recovering lost revenue, uncovering savings opportunities, serving your account holders better, finding the perfect personnel fit or delivering a 100% compliant overdraft program, JMFA has the right solutions to help you not only meet, but exceed, your goals. We are proud to be a preferred provider among many industry groups. To learn more please contact your local representative or call us at (800) 809-2307.

 

2020 40 years Academy account holder account holder retention account holder strategies account holder strategies; growth strategies; account holders Advice Agreement Analytics announcement Assistance ATMs Attendees attracting talent Automation B2B Balance Bank Bank of Pacific Banking banking services banks batching Benefit best practices board governance board member board of directors bottom line branch equipment branch profitability branding Bryan Hanks budget business business culture business environment business practices business processes business strategies career advice Case Study CEO onboarding CFPB change Charles Shanley Cher Cheryl Lawson Choose Chris Karstens Classroom clients Cloud Cohron commitment Communication communications Competitive Complaint Compliance compliance examinations compliance risks compliant Consistency Consistent consulting Consumer Consumer FInancial Protection Bureau consumer protection Consumers Contingency Contract Contract Analysis Contract Negotiation contract negotiations Contract Optimizer Contract Renegotiations contract review contract staffing Contracts Convenience core processor contracts Cornerstone Credit Union League corporate culture corporate governance CPE credits credit card contracts credit cards Credit Union credit unions Crissandra Fry CSS culture customer service cyber security Damian Darin Byrd Data Deal debit card contracts Debt Decisions Dick Miller digital directors Disclosed Discussion Dynamic economy Education efficiency studies election Emergency employee employee retention employees EMV migration evaluation Evolve executive search Expectations Expense expense management expense reduction expense studies expenses Experience Expert Experts Facilitators FastTrack Federal Reserve Board Feedback fees Financial Financial Institution financial services financial stability FinTech Floyd's Forum Free Analysis full disclosure Fully Generating Income generating leads generation governance government Halloween Hammond hiring HKW Holiday Holidays HR HR Consulting HR policies Hubur human capital human resources Implementation improved efficiencies improved results Inc. income income enhancement Innovate Innovative interview strategies interview tips IT contracts Jai James Jan Southern Jennifer Peoples Jim Griffis JMFA JMFA Academy JMFA clients JMFA News JMFA Next Generation Overdraft Privilege job search John M. Floyd John M. Floyd & Associates Keith Hughey Kelly Flynn Kennedy Kim Kreps Lawyer leaders leadership Learn Learning lending program Lesson Limits Linda Meyer Literacy