Pub 2 2013 Issue 7

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 28 W hile economic conditions and employment figures are showing signs of sustained improvement across the country, many consumers continue to face chal- lenges regarding their financial security. Accord - ing to a survey released by Bankrate.com, nearly three-quarters of Americans are living paycheck-to-paycheck, with little to no emergency savings. Fewer than one in four surveyed had enough of a cushion to cover unexpected medical expenses or other emergency situations. To make matters worse for these individuals and families, a simple financial mistake – such as an overdraft – can result in their being denied a checking account which is considered the most widely used financial services product in the country by the Federal Deposit In - surance Corporation (FDIC). According to a recent article in the New York Times, more than one million Americans have fallen into this category as the result of making an error on their account. And while some may view the frequent tendency to overdraw a checking account as a lack of financial sophistication or even lack of judgment, it is important to remember that many Americans struggle to accommodate unexpected expenses – or merely to make it until the next pay day. Without safe, basic financial services, many consumers are forced to turn to more costly, often unregulated sources for cashing checks and paying their bills. Compliant financial products provide a valuable solution While some large institutions are using databases to help them steer clear of consumers who have experienced financial difficulties, insti - tutions that provide fair, easy-to-understand products – such as a fully transparent overdraft program – can help consumers maintain financial stability and reinforce the value of long-term relationships with their account holders. A fully disclosed overdraft program that clearly defines the rules by which an account holder may access an overdraft service establishes a straightforward approach of responsible use. Plus, such programs give account holders a reliable tool for maintaining control of their money and help them to avoid less attractive choices of meeting their liquidity needs, such as resorting to high interest credit cards or payday lenders. Compliance is the key As regulators continue to push for more focus on consumer protec- tion, it is vital to have the proper policies and procedures in place to educate overdraft users about the importance of responsible use, as well as alternative strategies that might be better suited for their needs. Following are components of a fully compliant overdraft program: • 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 • communications materials that outline alternative financial products that more appropriately fit the needs of excessive overdraft users. No more business as usual There is currently much discussion about the importance of providing consumers with the products and services they want and need to con- duct their financial business. And while much attention is focused on the latest technology involving mobile capabilities, it is also important to make sure you are providing your customers with access to basic, fully transparent services that help them meet their financial obliga - tions with no surprise fees or undisclosed rules. At the same time, as economic and regulatory factors continue to restrict revenue opportunities for financial institutions, compliant income sources are critical for maintaining stability and a competitive edge. When implemented and managed correctly, a fully compliant overdraft program will give customers the financial peace of mind they are looking for and provide valuable revenue for your bank. 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. Helping Customers Maintain Financial Stability has Far-Reaching Benefits By JohnM. Floyd Chairman and CEO JohnM. Floyd & Associates