ODP Manager Letters as Needed

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The hosted ODP Manager software uses information from a daily extract file to determine when Collection letters should be sent to overdrawn accounts and which Custom letters should be sent to accounts when overdraft limits are assigned, or accounts opt in for Reg E. In addition to the Collection and Custom Letter functionality, the software also allows users the flexibility to send Ad Hoc letters as needed. These letters don’t rely on an account event to be triggered so users are not limited to criteria included in the daily extract file.

If you close and charge off an account before the standard number of days overdrawn, you will need to be able to generate an Account Closed letter. Or you may have ODP related letters that you send in specific situations other than those covered by the standard letter templates. You can even use Ad Hoc letters to generate your Fresh Start Loan agreements. Rather than creating letters manually, you can have Strunk set them up as Ad Hoc letter templates in the ODP Manager software.

If a user has a list of accounts that need to receive the specific letter, an Ad Hoc letter can be generated using the template, and sent to the customer. When you need to generate the letter, just enter the account number and the letter will pre-fill with the information from the software – name, address, and any other relevant fields. Letters can be generated one account at a time, or multiple account numbers at once. Once the letter has been generated, ODP Manager tracks and retains the letter just like your Collection and Custom letters.

Please contact Strunk Support at support@strunkaccess.com with any questions or to find out more details about using ODP Manager’s Ad Hoc letters.

Give ODP Customers a Fresh Start using ODP Manager

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A Fresh Start Repayment Plan is a tool available to overdrawn customers that will allow them to repay the overdrawn balance in up to 4 payments and will also allow them to retain the use of their checking account. It also may help financial institutions recover and collect on accounts which may have otherwise charged off.

ODP Manager collection letters advise customers that have overdrawn balances of $100 or more that they may be able to pay back the overdraft balance in up to four installments rather than the entire balance at once. Interested customers are then assessed to determine the customer’s ability to qualify and repay the Fresh Start.

With each approved Fresh Start repayment plan, ODP Manager users can enter a repayment schedule for each account. The repayment schedule can be used to populate the Fresh Start Agreement or users can also populate the FS Agreement directly as an Ad Hoc Letter. The repayment schedule includes reminders that display when a FS payment is due. When the payment is due, ODP Manager users can check the core system to confirm if the payment has been made as agreed. Once verified, Fresh Start payments can also be tracked in ODP Manager.

If a customer’s Fresh Start payment is not paid as agreed (ten or more days past due), the Fresh Start is in default and the checking account should be closed and charged off. The Fresh Start Default letter in ODP Manager can be generated to notify the customer that the account has been closed, charged off, and reported to the appropriate agencies.

If any other Fresh Start letters are needed for accounts in a repayment status, an Ad Hoc letter template can be created. By entering the deposit account number, ODP Manager will pre-fill the account information. After the letter is generated, it will be tracked and retained in ODP Manager just like the other Collection and Custom letters.

ODP Manager includes two types of Fresh Start reporting. The Fresh Start Tracking report displays a list of all checking accounts currently under a Fresh Start repayment plan with a Fresh Start ODP Status code. If details are needed about current repayment schedules, a Repayment Schedule summary report can also be exported to PDF or Excel.

Please contact Strunk Support at support@strunkaccess.com with any questions or to find out more details about ODP Manager’s Fresh Start Repayment Plan features.

Understanding your critical vendors

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Knowing who your most crucial vendors are, also known as your most significant vendors, is a fundamental element of a risk-based vendor management program. The idea that a “critical vendor” and a “high-risk vendor” are interchangeable is a prevalent misconception. When establishing your program, it’s crucial to distinguish between the two because they are not the same thing.

Not only is it a smart practice, but many industries have regulations requiring you to identify your critical vendors. Despite minor differences in definitions among regulatory agencies, critical vendors do have a few traits in common that are always relevant:

· The product or service provided by the vendor is vital for your day to day operations.

· If the vendor doesn’t deliver the goods or service as specified, it will have a significant impact on your business or your customers.

When interacting with your critical vendors, exercise caution. Avoid taking shortcuts since they could leave hidden or unaddressed risks that could jeopardize the security of your business.

However, regardless of how important they are to your business’ operations, a high-risk vendor poses a higher amount of danger to your business. A typical illustration is a vendor who handles, keeps, or has access to your non-public data. The fact that these vendors have access to your data makes them more dangerous, but the services they actually offer might not be vital to your business.

Knowing your own key activities clearly is the first step in defining which vendors are critical and which vendors are high risk. To prevent serious threats to your business it is important to identify who your critical vendors are and what role they play inside of the company’s operations. Critical vendors are essential to your business’s day-to-day operations despite their dangers. You’ll build a strong and enduring partnership by exercising diligence and adhering to the greatest vendor risk management techniques.

CFPB Guidance: Surprise Overdraft Fees and Returned Check Fees Explained

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The Consumer Financial Protection Bureau (CFPB) published guidance on October 26, 2022, stating that “surprise overdraft fees” and “returned deposited item fees” generally constitute “unfair practices” in violation of the federal Consumer Financial Protection Act when consumers are unable to avoid them. In its analysis, the CFPB underlined that an act or practice is illegally unfair when it significantly harms consumers or is likely to do so, harm that consumers cannot reasonably be expected to avoid, and (ii) harm that is not outweighed by advantages to consumers or to competition.

The guidance from the Consumer Financial Protection Bureau (CFPB) (Circular 2022-06) focuses on “unanticipated” overdraft fees, or those resulting from activities that a consumer would not ordinarily anticipate an overdraft fee. The guidance focuses on debit card transactions in which the available amount appears to be sufficient when the consumer initiates the transaction but is insufficient when the transaction is settled, resulting in an overdraft fee. According to the guidance, consumers may readily check their available balance via mobile apps, the internet, ATMs, or their phone, so they shouldn’t fairly anticipate paying an overdraft fee in this circumstance.

In addition, the guidance states a consumer is likely to reasonably expect that if a debit card transaction is authorized at the point of sale, he or she will not later incur an overdraft fee. The guidance notes that consumers cannot reasonably be expected to understand and account for delays between authorization and payment, nor can they control the methods by which a financial institution settles other transactions that could affect the imposition of overdraft fees. The guidance concludes that the injury from unanticipated overdraft fees likely is not outweighed by any countervailing benefits to consumers or to competition.

According to the CFPB’s guidance (Circular 2022-06), practices that charge consumers flat fees for all transactions, regardless of the specifics of the transaction or patterns on the account, are probably unjust. Since a depositor typically has no influence over whether a deposited check will be paid or not and has no reason to anticipate that a placed check will be returned, the guideline emphasizes that consumers are not reasonably able to avoid such costs.

According to the guidance, returned deposited item costs harm consumers significantly and are not likely to be offset by advantages to consumers or to competition. It’s crucial to remember that the guidance focuses on financial institution policies that broadly impose returned deposited item fees in situations where consumers are unaware that checks may be returned. The guidance states that policies with fines that are intended to deter consumer conduct, such as frequently depositing faulty checks from the same originator or depositing checks that are not signed, are not in violation of the rule.

The good news is neither of these issues should prohibit any FI from keeping their ODP program in place! However, action must be taken to avoid both of these specific instances.

The CFPB is not offering a resolution for either of these issues via disclosure. Nor are they providing a time frame within which to achieve compliance. In fact, they are saying that transaction processing rules are often complex so regardless of disclosure it isn’t reasonable for consumers to necessarily understand how the process works. So, the only resolution for ‘authorize positive, settle negative’ is to stop doing it if that is how your transactions are processed today. Sadly, the CFPB has not yet issued a Rule mandating core processors to add the necessary capability to prevent charging a fee for an item allowed on “good funds.” In addition, some core processors may postpone the creation of the module (or patch), which eliminates the regulatory risk, in the absence of such a regulatory mandate. This will still fall on the financial institution to put controls in place to prevent charging these fees.

The solution on the returned deposit item fee appears relatively simple – if you charge a returned deposit item fee today – stop. The CFPB does offer some guidance on certain circumstances where changing that fee may be reasonable – for example, if a depository institution only charges consumers a fee if they repeatedly deposit bad checks from the same originator, or only charges consumers a fee when checks are unsigned, those fees would likely be reasonably avoidable by the consumer. However, my take on that is it really isn’t worth trying to monitor the specific reasons the fee was charged in each instance. Far easier to just not charge the fee and be sure to avoid the regulatory criticism. Returned deposit item fees really don’t have anything to do with ODP so we’re not familiar with the instance of occurrence, but I assume these fees don’t add up to much for the typical community institution.

Strunk’s recommendations have continued to include clearer wording and open information regarding how fees are calculated. We have actively helped community banks and credit unions address the problems mentioned in the bureau’s advice throughout the years. Strunk often receive feedback from clients regarding issues raised during their examinations. Additionally, we stay in contact with the state and national banking associations’ legal counsel on topics related to overdraft protections to make sure we stay in front of any issues for our clients.

 

Overdraft Protection Programs?

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Several federal regulators have recently come up with “guidance” on how banks should handle the payment of debits that cause overdrafts and whether or not a fee should be levied against the account.

In August the FDIC warned banks that proper disclosure of charging a fee for an item presented a second time is important so that consumers understand that there can be more than one NSF charge on the same item. Even though banks have had the same practice for decades the FDIC is now warning banks of possible UDAAP violations.

More recently the CFPB wants banks to ensure they are not charging a fee for a debit card transaction that causes an overdraft when the item hits the books when it was previously approved at point of sale. Also, banks are warned to not charge consumers a fee for a deposited item that comes back to the account as a NSF item. It is yet to be seen what impact this will have on community banks but this “guidance” from the regulatory body covering banks with over $10B in assets should be reviewed by your bank.

Strunk’s Overdraft Privilege program is nearing its 30th year of existence and it remains a tremendous customer service for those who need it. Returning items unpaid to a merchant only creates havoc for consumers. Likewise, if a consumer wants their debit card transaction paid rather than denied at point of sale Overdraft Privilege can help out. Consumer choice is how banking should work. Providing proper disclosure and ensuring the bank follows the disclosures is key.

Contact Strunk at 800.728.3116 or at support@strunkaccess.com to learn more about how Overdraft Privilege can benefit your bank and your customers.

What we know now about overdraft privilege

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Overdraft privilege appears to have been widely covered in the media over the past 12 months.  We wanted to address some of the most recent worries that have been raised in these news pieces because overdraft privilege programs have received a lot of negative attention and inaccurate information.

  1. Overdraft Privilege has not undergone any new regulatory changes: In July the U.S. House Committee on Financial Services passed the H.R. 4277, the Overdraft Protection Act. This legislation has been presented by Congresswoman Carolyn Maloney (NY) every year since 2009 to the House and has never pass the Senate.  Although the banking industry has evolved significantly since the initial version of the bill was introduced in 2009, its language has remained stagnant and does not take into account the realities faced by modern consumers.  Since the initial version of the bill was introduced, financial institutions have made considerable adjustments to their overdraft programs to be more consumer friendly.  Because overdraft privilege “remains one of the few short-term liquidity products available to consumers within the well-regulated, well supervised banking system,” financial institutions are expanding the flexibility of their product offerings to meet consumer demand and are emphasizing choice in an increasingly competitive market.  This is why it will be the same as the previous 10+ years in that this bill won’t go any farther than it already has.
  2. Almost all financial institution still have some sort of Overdraft Privilege Program: August 2021 we started hearing about financial institutions that were eliminating their overdraft fees. What we found that most financial institutions that were eliminating overdraft fees were doing it for specific accounts.  Most of these financial institutions created a ‘checkless’ checking account for consumers who did not want overdrafts/nsf on their checking accounts.  With these accounts, consumers would not have access to checks and also be limited on what they can do with their debit card transactions, providing no overdraft/nsf transactions. Unfortunately, these accounts are not always free accounts.  It seems most financial institutions are charging Monthly Maintenance fees for this account and some financial institutions are even charging excessive transaction fees.  This type of product is not for everyone because there are consumers that still want access to checks and don’t want to pay a monthly maintenance fee for their checking account.   This past year, through surveys we learned that consumers understand overdraft privilege, they would much rather their item be paid instead of returned, consumers believe od fees are reasonable, and they don’t want to see any reduction to their overdraft access. Overdraft Privilege is still a better product for consumers and consumers still want access to an overdraft limit.
  3. Regulatory groups have started to really focus on NSF fees and Re-Presentments: August 2022 FDIC released Supervisory Guidance on Multiple Re-Presentment NSF Fees. The FDIC stated that it is issuing the guidance because of its observations in consumers compliance exams where consumers are charged multiple NSF fees for the same transaction when a merchant resubmits the transaction for payment. The FDIC has also observed that some institutions’ disclosures did not adequately describe the institution’s re-presentment practice. Luckily for Strunk clients we have been sensitive to this issue for quite a while. In the Spring of 2020 Strunk issued suggested language for checking account agreements to all of our clients to provide enhanced disclosure regarding an arbitration provision.  Also, Strunk’s Overdraft Privilege Service Policy has always included specific language regarding re-presentments. These two things provide for a very strong argument that our client financial institutions are already handling disclosure regarding this issue properly.

Even though there have not been any changes to overdraft regulations, some financial institutions felt political and regulatory pressure to make changes to their overdraft privilege program.  We know that overdraft privilege is a much better service for consumers than returning their items.  Elimination of overdrafts, resulting in more payments being returned, which can lead to repercussions for the consumer such as late payment fees, merchant fees, and potential negative impacts to their credit.

How Strunk clients can properly handle the issue of re-presentment

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Strunk has been closely monitoring and sensitive to the issue of re-presentment of declined transactions for the past several years. Strunk provides clients with suggested language for checking account agreements to include enhanced disclosure regarding an arbitration provision as well as a service policy that includes specific language regarding re-presentment. These documents allow Strunk clients to handle disclosure of this issue, and many others, properly.

The suggested language for checking account agreements includes a section on re-presentment of declined transactions which addresses the points regarding disclosure referenced in the FDIC guidance – this was one of the main reasons for including the arbitration clause. Through the use of these materials Strunk clients are already handling disclosure regarding this issue properly.

In addition to disclosure, the other point that should always be stressed with examiners is that an account holder with Overdraft Privilege will essentially NEVER be charged a re-presentment NSF fee because their item will be paid the first time. The only way an ODP customer could be charged for a represented item is if they have already exceeded their overdraft limit – i.e if they have a limit of $800 and their balance is already negative $800 or more, items will begin to be returned.

Strunk clients that require current copies of the ODP service policy or the language for checking account agreements should contact Strunk support at support@strunkaccess.com or visit the Strunk Access portal. Additionally, Strunk offers periodic reviews of client programs, which would include commentary on each of the suggested potential remedies from the FDIC regarding re-presented items. These reviews also consist of solutions to address compliance and to increase service charge income.

Document Retention in ODP Manager

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As part of the daily use of the hosted ODP Manager software, users may generate or review documents such as letters or reports. ODP Manager includes features that make it easier for these documents to be retained for future reference.

Each time a user generates a letter, a PDF of the letter is saved and linked to the account’s event history. This makes it easy for letters to be retrieved by customer account or by date and letter type.

The ODP Manager solution allows you to export and save your institution’s reports as Excel or PDF files. The most up-to-date information is always viewable under the Reports section. Users are also able to access reports from the most recent seven As of Dates.

If past reports are retained for additional analysis, there is an alternative to manually exporting and saving copies of reports. If requested, Strunk can set up a Report Archive that includes any of the reports available in ODP Manager. The requested reports will be automatically archived after each import.

Once the Report Archive has been created, PDF files are automatically saved within ODP Manager after each import of the daily extract file. Archived reports are organized by As of Date and retrieved from the Archived Reports section. If your institution would rather download the reports from the archive to save to a network drive instead, a Download Archives link can be set up as an alternative.

Let the document retention features in ODP Manager streamline your ODP letters and report retention! Please contact Strunk Support at support@strunkaccess.com with any questions or to find out more about using these features.

Overdraft Privilege Provides a Solution for Charging Multiple NSF Fees

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When a merchant transaction is presented for payment from a consumer account and is refused due to the customer’s insufficient funds to cover the transaction, financial institutions typically charge an NSF fee. When a merchant tries to present the same transaction again in order to recover the denied funds, he or she may be charged a re-presentment NSF fee. If a depository institution receives this type of repeated merchant payment transaction more than once, the depository institution may levy multiple NSF fees. If an Automated Clearing House (ACH) or other item is presented for payment and is denied owing to insufficient funds, certain financial institutions will levy an NSF fee for both the original presentment and each subsequent representation.

In recent class action lawsuits against financial institutions, the removal of key clauses pertaining to the assessment of representation fees was considered to be a violation of contract. Some lawsuits have been settled, with customers receiving refunds and legal fees.  Additionally, state, and federal financial regulators are reviewing DDA agreements searching for potential legal, regulatory and UDAP risks. With these potential risks it is important to review your deposit disclosures and contract language to ensure the way NSF fees are charged is being communicated clearly and consistent to what a consumer could reasonably expect.

This is a great time to make sure that you review your accounts and all of your customers/members that are eligible for Overdraft Privilege should be added to the ODP program unless they have opted out of the program.  By doing this it will minimize your risk for NSF fees being represented, because if your customers/members have an Overdraft limit their items will be considered for payment instead of returned.  Paying the item instead of returning it will ensure that the financial institution minimizes its risk for NSF re-presentments because the item is not returned.  Also, overdraft privilege provides a better service to your customers/members because they will not be faced with potential late fees, retailer fees and damage to their credit from returned items.

Accept Electronic Consent to Opt In for Regulation E

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ODP Manager helps you distribute your Consent Form for Overdraft Services to your customers that have not already opted in for Reg E by including the opt in form with Welcome letters, Reinstatement letters, and the Reg E Opt-in Followup letter. This makes it easy for customers that would like to opt in by mail, but there are three other methods for a customer to opt in: in person, by phone, or electronically. The Reg E opt in form will direct your customers to the appropriate mailing address, phone number to call, or to visit a branch, but are you prepared to accept an electronic response?

ODP Manager includes a feature which can assist you in obtaining your customer’s electronic consent to opt in to ODP coverage for ATM and everyday debit card transactions. Strunk can create a Reg E opt in form and Reg E opt out form that mirrors the content in your ODP Manager letters. You would then add links to these forms to your website.

When your customer visits your website and completes either the Consent Form for Overdraft Services or the Consent to Opt-Out, they will receive an email confirmation of their Reg E election. Also, this response will be tracked in ODP Manager and can be emailed to a designated email address at your financial institution.

Your ODP Manager users will review the new responses in ODP Manager, export a list of accounts that need an update to their Reg E election, and perform the appropriate maintenance in your core software – updating the account record to either opt in or opt out the customer’s requested account. By default, the hosted ODP Manager software displays new responses that have not been reviewed and exported. Prior submissions are also retained to allow your users to review previous responses.

If you would like to set up ODP Manager to accept electronic consent to opt in for Overdraft Privilege coverage for ATM and everyday debit card transactions, please contact Strunk Support at support@strunkaccess.com with any questions or to find out more.

An independent certified public accountant has examined Strunk’s operations and found them to be in compliance with the AICPA’s Trust Service Principles. It was determined that Strunk meets the Security, Availability, Processing Integrity, Confidentiality, and Privacy criteria for SOC 2 established by the AICPA.