Pub. 2 2013 Issue 6

l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s 20 A fter much anticipation regarding results of the inquiry into overdraft programs, initiated by the Consumer Financial Protection Bureau (CFPB) in February 2012, the Bureau offered a glimpse of its findings in a White Paper released June 11, 2013. Based on information received from banks in its study survey, along with feedback from the public, the CFPB announced that it will continue to study the issue before addressing any policy changes. And while the CFPB inquiry is currently focused on a pre-determined number of banks, its final ruling will impact institutions across the board. In discussing the study with the media, CFPB Director Richard Cordray stated that the banks are marketing these programs as protective measures that allow customers to avoid returned checks and declined transactions. “But the study raises serious questions,” he said. “What is marketed as overdraft protection can in some instances put consumers in greater risk of harm,” Cordray continued. “Consumers need to be able to control their costs and expenses, and they deserve clarity on these issues.” The CFPB disclosed that nothing in the report implies that banks and credit unions should be precluded from offering overdraft coverage for account holders. In fact, in announcing the launch of the overdraft study, Cordray said that “overdrafts can provide consumers with needed access to funds.” Nonetheless, the Bureau plans further analysis of its findings regarding the number of consumers who are incurring heavy overdraft fees or account closures, along with the wide variations in practices and procedures used by financial institutions to determine whether they are causing the kind of consumer harm that the federal consumer protections laws are designed to prevent. According to Cordray, “Financial institutions have very different policies, procedures and practices that can be highly complex and difficult for consumers to understand, yet greatly affect whether and how often they will incur overdraft fees.” And while he declined to comment on possible further action by the CFPB, he said the Bureau would continue to examine the subject carefully. Protect your customers and your bank with full disclosure In today’s highly regulated environment, banks must strike a balance of compliance and good customer service to succeed. Providing customers with the products and services they want and need, while meeting and maintaining compliance requirements, can be challenging; but it must remain a priority to avoid increased regulatory scrutiny. As the industry anticipates the CFPB’s final ruling on overdraft programs, there are steps that can be taken right away to ensure that your overdraft processes and procedures are compliant with all regulatory and consumer protection concerns. The key is to provide your account holders with the following: • complete transparency regarding fees and program procedures; • reasonable, communicated overdraft fees; • clearly established overdraft limits; • transaction clearing policies that avoid maximizing overdrafts and related fees created by the clearing order; • the ability to easily monitor excessive usage; and • communication materials that outline alternative financial products that more appropriately fit the needs of excessive overdraft users. Community banks can survive and prosper in today’s environment by starting out with compliant products and educating their employees about how to explain the value of the products to account holders. This simple combination will result in fewer regulatory concerns and strong customer relationships; along with the ability to maintain a healthy bottom line without having to raise fees or initiate new service charges. John M. Floyd & Associates (JMFA), an Associate Member of the Kansas Bankers Association, is a leading provider of profitability and performance-improvement consulting. 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 with programs like JMFA Overdraft Privilege®. JMFA is also recognized for earnings enhancement and expense control programs, training and recruitment services, as well as product, service, pricing and technology-improvement con- sulting. Simply stated, JMFA’s programs and services are designed to increase income or reduce expenses. JMFA is proud to be a preferred provider among many industry groups. To learn more about JMFA, please contact Andre Branning, JMFA regional director, at Andre.Branning@JMFA.com or (314) 440-9095. CFPB Releases White Paper on Overdraft Programs CFPB Director states, “Overdrafts can provide consumers with needed access to funds” ByJohnM. Floyd Chairman and CEO JohnM. Floyd & Associates