Title: Road Block? Financial Institutions Get Ready for July 1 Deadline for Debit-Card Overdraft Compliance. but the Threat of Congressional Action to Effectively Block the Service Hasn't Evaporated
Abstract: [ILLUSTRATION OMITTED] Teche Federal Bank's Ross Little may be the envy of most community banks America. All who offer even an informal overdraft checking service that includes debit cards and ATM transfers and withdrawals face a July 1 deadline to obtain customers' opt in to overdraft charges, exchange for being able to use their cards even if they lack sufficient funds. Many banks have yet to mail a single notice. But the $750 million-assets thrift, based Franklin, La., has already reached two-thirds of its debit-card and over 90% of them have opted in. Little, senior vice-president, marketing, had expected to do wave after wave of expensive direct mail, with diminishing returns. He didn't like the math. After some research about customer transaction patterns, he found his solution. Tellers. We trained our tellers to talk to customers about opting in, says Little. bank's 100-teller force became quite focused about it, and Little believes Teche Federal is well on its way to maximum opt-in. The tellers know the customers, says Little. And it appears that customers want this service--and overwhelmingly want it. Like many community banks, Tech Federal doesn't market fee-based overdraft, but offers it case by case. But under the Federal Reserve's November 2009 amendments to Regulation E, any financial institution offering the service at all--whether ad hoc like Teche or a marketed, automated program--must comply with the opt-in rules, and more. Transparency and informed choice are the keys here, counsels Nessa Feddis, ABA vice-president and senior counsel, and part of a large team the association has working on this issue tandem with a special banker Overdraft Program Task Force. stakes are high, multiple senses. Many intersecting trends After describing the efforts his bank plans for outreach, Connecticut banker Rheo Brouillard describes a key risk: public perception. Customers are not going to be angry at the Fed, if something is misunderstood and they get burned, says Brouillard, task force member and president and CEO, Savings Institute Bank and Trust Co., Willimantic. They're going to be angry at us. Simple concept, overdraft programs remain fraught with challenges--political, technical, compliance, communications, financial, and even service-related. conclusion emerges from extensive interviews with lobbyists, vendors, and consultants. Regarding the last challenge--service--some fear the rapidly growing utility of debit cards could be stymied. We refer to such risks as 'unintended consequences', says Marc Paine, executive vice-president at Strunk & Associates L.P., an ABA-endorsed overdraft vendor. This could turn people off from wanting to use debit cards and merchants from being willing to accept them. Several trends crisscross here. Certainly, there's ongoing financial regulatory reform and changing political winds. Changes credit card law may be revamping credit versus debit demographics. Ever-increasing thirst for convenience plays a role. So do changes financial literacy, priorities, and attitudes. are not bankers, says Cheryl Lawson, executive vice-president, compliance review, at overdraft protection vendor John M. Floyd & Associates. consumers don't reconcile their checking accounts. Most don't maintain a register. What we are seeing today is 'transactions transition', says Michael Moebs, economist and CEO of Moebs Services, Inc., a statistical firm and marketer of overdraft services as well. Consumers often want it Many bankers stress that increased regulation and the threat of more legislation must be balanced with consumer needs and preferences. For instance, $159 billion-assets Branch Banking & Trust Co., Winston Salem, N. …
Publication Year: 2010
Publication Date: 2010-04-01
Language: en
Type: article
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