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The Rules on Overdraft Programs have changed, but Consumers Still Need a Financial Safety Net
Friday, May 23, 2014 5:55 AM

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, credit unions can help account holders avoid these difficult situations, according to John M. Floyd, chairman and CEO of John M. Floyd and Associates (JMFA) – a business partner of Credit Union Resources.

“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overdrafts resulting from ATM withdrawals and one-time debit card transactions, many existing overdraft programs are outdated or obsolete,” notes Floyd.

To provide your account holders with the most up-to-date overdraft solution, Floyd says 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,” Floyd notes. “With the proper policies and procedures in place to educate overdraft users about the importance of responsible use, your credit union can alleviate compliance concerns and better serve your account holders.”