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As regulators continue to scrutinize rules affecting overdraft programs, having robust software that provides more efficient program management can help increase revenue. We wondered how well offering an overdraft protection program, or ODP, would work for real members, so I set to find out.


Lance Worsham, VP finance for Allegiance Credit Union in Oklahoma City told me they use John M. Floyd and Associates (JMFA) for their overdraft privilege program, which offers analytics, reporting, and tracking. They had used JMFA’s program from June 2009 through May 2011 and continued to use their software and compliance piece afterward. Then in May 2015, they contracted with JMFA again to jumpstart their program.

How has it enhanced Allegiance’s non-interest fee income as a result? Prior to 2009, they had seen a steady decline in their overdraft fee income. “With JMFA’s program, we saw an increase in fee income of 38.50 percent in the first year, and 24.20 percent the second year,” Worsham said. “Once the contract ended, the decline started again.”

That was the reason they decided to re-contract with JMFA and employ the overdraft privilege program again. “It has been extremely successful,” Worsham noted, “with an increase in our fee income of nearly 17 percent since May 2015. For a seasoned program such as ours, we are very happy with the results.”

As with most services, a fee is necessary for the time and expense of running a successful overdraft privilege program. However, members only get charged a fee if they use it. So, how do members feel about the fee aspect?

“Many members have decided the potential fee is worth not having the embarrassment of their card being declined while checking out at a store,” Worsham said. “When we make our initial courtesy call regarding their overdraft, several express their gratitude for the service and how it has benefitted them.”

The program has given the members a safety net for those occasions when they make a mistake in their check book, and when an emergency arises and they need some quick cash.

Worsham recalled a story about one of their members who was traveling through Arizona when she had a flat tire and ended up stuck on the side of the road. She called her credit union for a loan to help with the unexpected expense, but since she was stranded, she didn’t have a way to sign the documents. To complicate matters, her next payday wasn’t for another week, and she didn’t own credit cards. Allegiance staff explained about their overdraft privilege program and how it was available for emergencies like hers.

“She was so grateful,” Worsham said. “She said it was worth the fee for an emergency like this.”

Even the Allegiance employees appreciate the privilege. One employee told Worsham, “Even though I work here, believe it or not, I frequently forget to handle my own account. A few months ago, I had forgotten to transfer money from another account into my checking, and I came in to work to find an NSF on my account. Yikes, how embarrassing. But that is all it was––embarrassing between me and my computer. I got a small monetary lesson to remind me to keep my stuff straight. Nothing bounced. No one was alerted to my mismanagement of funds. There was no FB update regarding it. The overdraft protection just covered me and I went on about my business.”

An overdraft privilege program can be a cultural shift for credit unions. “It has given our staff a new way of looking at overdrafts,” Worsham said. “Before, overdrafts were considered taboo. However, the culture we live in has changed. Many members today are lax in their checkbook balancing and want to know that if they exceed their balance, they’ll be covered. They will overdraft an account somewhere, so we might as well be the one to offer this service and build the loyal relationship that will sustain our growth and income capabilities.”

One thing Worsham really appreciates is JMFA’s professionalism, thoroughness, and great customer service. “Their experience and expertise have made their program successful,” he said. “And their compliance guarantee brings peace of mind in this compliance-centric industry.”

With the loss of income as a result of regulatory expenses, it appears that offering your members a high-performance, consumer-friendly overdraft program may make a positive difference in your bottom line


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