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Fully Communicated Overdraft Solution Meets Regulatory Expectations and Member Needs
Wednesday, December 17, 2014 6:40 AM

A great deal has been written in the past few years—by regulators and consumer groups alike—concerning overdraft program fees and procedures. And while the Consumer Financial Protection Bureau continues to weigh whether new rules governing overdraft and related services are warranted, many consumers continue to face economic challenges that make it difficult to maintain financial stability. At the same time, however, some consumers express confusion regarding how much they pay in overdraft fees and how their financial institution’s program actually works.

Clearly communicated program offers reliable financial safety net
A fully disclosed overdraft program that clearly defines the rules by which an account holder may access an overdraft service gives credit union members a reliable tool for maintaining control of their money. It also helps them to avoid less attractive choices for meeting their liquidity needs, such as resorting to high-interest-rate credit cards or relying on pay day loans.

Credit unions can alleviate any confusion regarding overdraft fees and procedures by implementing best practices that provide members with a clear explanation of program procedures and details. This includes the policies that determine how to opt in to coverage for ATM and one-time debit-card transactions, as well as information on overdraft coverage limits, transaction posting order, overdraft and insufficient funds fee structure, and involuntary account closures.

Best practices lead to greatest results
Regardless of the CFPB's final ruling, credit unions can continue to make a positive impact in their members' ability to maintain financial stability by offering a fully transparent overdraft program with the following built-in safeguards:

  • Reasonable, communicated fees;
  • Clearly established overdraft limits;
  • Transaction clearing policies that avoid maximizing member overdrafts and related fees created by the clearing order;
  • The ability to easily monitor excessive usage; and
  • Communications materials that outline alternative financial products which more appropriately fit the needs of excessive overdraft users.

In today's environment, the ability to strike a balance between compliance and good service that includes valuable, reasonably priced products is key to remaining competitive in the marketplace, while avoiding increased regulatory scrutiny.


JMFA is an endorsed business partner of Credit Union Resources, Inc. (a division of the Cornerstone Credit Union League) and a leading provider of profitability and performance-improvement consulting. They offer a comprehensive line of programs, support, and consulting services on earnings enhancement, expense control, organizational workflow, account acquisition programs, and sales and service programs. For more than 35 years, JMFA has been recognized as one of the most trusted names in the industry, helping financial institutions enhance their bottom line.