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The Rules on Overdraft Programs Have Changed, but Consumers Still Need a Financial Safety Net

By John M. Floyd, Chairman and CEO

While the overall economic forecast is improving, many consumers remain concerned about unemployment and personal financial issues, ranging from meeting everyday expenses to paying income tax responsibilities. According to a survey by the Center for Financial Services Innovation, every year an estimated 15 million people access small-dollar credit products to meet their needs. 

Whether as a result of unplanned expenses or an error in reconciling a checkbook, financial shortfalls can happen to anyone. And without a financial safety net, many consumers often experience difficulty paying their bills, facing costly merchant check return fees when their account has insufficient funds. By providing a user-friendly overdraft program, your institution can help account holders avoid these difficult situations.

Changing regulations necessitate program revisions
With the implementation of new consumer protection regulations and restrictions on charging fees for overdrafts resulting from ATM withdrawals and one-time debit card transactions, many existing overdraft programs are outdated or obsolete. To provide your account holders with the most up-to-date overdraft solution, your overdraft program should include the following:

• effective consumer communications materials that explain how the program works and how to use it responsibly;
• strong analytical data and more robust data monitoring and analysis capabilities to measure results; and 
• reliable methodologies to gauge on-going program performance and implement any necessary improvements.

In today’s highly regulated environment, financial institutions must strike a balance of compliance and service excellence to thrive. With the proper policies and procedures in place to educate overdraft users about the importance of responsible use, your bank or credit union can alleviate compliance concerns and better serve your account holders.

Plus, by providing your account holders with an up-to-date, fully communicated and reasonably priced overdraft program, you can strengthen your position as their preferred provider of financial services and increase your competitive advantage in the market. 

To learn more about the all new JMFA OVERDRAFT PRIVILEGE® program or where we see the industry going, contact the representative for your region.

As seen in:
Kentucky Credit Union League's MarketPlace Newsletter- June 5, 2014 
Georgia Bankers Association's GBA Bulletin- May 30, 2014
Cornerstone Credit Union League's Leaguer- May 23, 2014
Hawaii Credit Union League E-newsletter- May 2014