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JMFA: Full Disclosure Remains Key to Maintaining Compliant Overdraft Protection Program
Monday, June 30, 2014 6:30 AM

A year after the release of a White Paper that summarized its initial findings from an analysis of overdraft practices used in nine large banks, the Consumer Financial Protection Bureau (CFPB) has changed the date for further pre-rule activities on overdraft programs to February 2015, according to its Spring 2014 rulemaking agenda.

As the CFPB continues to study whether rules governing overdraft and related services are warranted, and, if so, what types of rules would be appropriate, it is imperative for financial institutions to maintain best practices and avoid the type of procedures that were identified in the CFPB’s White Paper as harmful to consumers. These include policies that determine how account holders opt in to overdraft coverage for ATM and one-time debit card transactions, overdraft coverage limits, transaction posting order, overdraft and insufficient funds fee structure, and involuntary account closures.  

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resulting from ATM withdrawals and one-time debit card transactions (Reg E), many existing overdraft programs are outdated or obsolete. To provide account holders with the most up-to-date overdraft solution, John M. Floyd & Associates suggest that programs should include the following:

  • updated communications materials for account holders to fully understand the benefits of the service and how to use it responsibly;
  • improved analytics, and more robust data monitoring and analysis to support better program management; and
  • strong reporting and tracking capabilities to measure program performance and implement any necessary improvements.

JMFA is a business partner of Credit Union Resources.