The Importance of Employee Training for your Overdraft Program

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Does your front-line staff have a biased opinion regarding overdraft privilege and present it in a negative tone?  Is your front-line staff having a hard time explaining overdraft privilege to your customers/members and not really sure what to say to them? If you haven’t had a chance to listen to your employees’ present overdraft privilege to your customers/members, especially Reg. E, Strunk recommends doing it now.  Your staff should explain overdraft privilege and its options to your customers/members in a clear, consistent, compliant, and impartial way.

Sometimes front-line employees do not understand the true benefits overdraft privilege can provide to the customer/member.  Some employees often have a bad perception of overdraft privilege because they associate it with disgruntled or confused account holders. This misunderstanding is one of the main reasons why overdraft privilege training and education are so important!  It is important to provide your employees with a script on how to present overdraft privilege and the benefits of opting into Reg. E. Employees that have practiced and memorized a customer/member-focused overdraft privilege and Reg. E script, ensure that the approach is compliant, succinct, and easy to grasp.

Using the technique of allowing the customer to choose how the financial institution should manage a transaction that would overdraw the customers/members account before the due date ensures their happiness and loyalty.  Strunk’s Overdraft Privilege training will provide a clear understanding of the overdraft program and provide consistent talking points to your employees.  After overdraft privilege training your employees will be equipped with correct and thorough knowledge regarding your program.  Strunk will ensure your employees are equipped with a non-biased, clear and compliant script that provides account holders accurate information so they can make the best decision possible for their situation.  Overdraft privilege training will increase your employees’ confidence as a result of this approach, which will boost their performance, productivity, and level of service to your customers/members.

 

Following Up with Frequent Overdraft Privilege Users

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Financial institutions are expected to monitor excessive consumer Overdraft Privilege usage to inform customers of additional available options for overdraft protection. These options could be an Overdraft Protection Credit Line or an Overdraft Protection Transfer from another account with the financial institution.

FDIC regulated institutions are expected to give customers who overdraw their accounts on more than six occasions where a fee is charged in a rolling twelve-month period a reasonable opportunity to choose a less costly alternative and decide whether to continue with fee-based overdraft coverage. Strunk also recommends that institutions not regulated by the FDIC also communicate available alternatives to ODP on an annual basis to accounts with insufficient funds items.

ODP Manager can assist with sending letters advising your customers of the alternatives to Overdraft Privilege. If the ODP Manager import file includes data from the core system that indicates when an account has qualified for the letter by exceeding the threshold, the hosted software can automatically show when a letter is due to be sent. If the data is unable to be added to the extract file but qualifying accounts can be identified from an existing core report or other method, a letter can be generated, as needed, as an Ad Hoc letter.

Once the letter is generated, the letter is tracked and retained within the ODP Manager application.

Please contact Strunk Support at support@strunkaccess.com with any questions or to find out more about using ODP Manager’s Excessive Use Notification letter.

ODP Manager Account History

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One major benefit of the hosted ODP Manager software is access to the software’s advanced history tracking. Key account events are tracked in the system and are searchable.

When the daily extract file from the core system is imported into ODP Manager, significant account status changes are tracked. Is the account newly overdrawn or now in good standing? Has an overdraft limit been added to or removed from the account? Has the consumer opted their account in to or out of ATM and everyday debit card transaction coverage according to Regulation E? Has the account been closed? These items are all tracked and retained in each individual account’s history.

When a user generates a collection, custom, or ad hoc letter, not only is the letter type, description, and date recorded, but also a PDF of the letter is saved and linked to the account history and the event history. All letters are stored within the application and can be regenerated at any time.

If a user needs to make further contributions to the account record, a comment or reminder can be created. Notes can be saved to the account as a comment. Reminders can be created for follow-up items with a specific due date. Both comments and reminders are accessible to all users and can include attachments.

Searching for events can be done for an individual account or across a range of dates. Individual account information is easily exported to PDF. Events occurring during a specified timeframe can be filtered and exported to Excel.

Please contact Strunk Support at support@strunkaccess.com with any questions or to find out more about ODP Manager’s advanced event history tracking.

Inform Your Customers About Their Regulation E Opt-In Options

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The Consent Form for Overdraft Services (A-9 form) provides your customer with the information they need to know about overdrafts and overdraft fees. In addition to serving as a disclosure of the appropriate information, it also facilitates a customer’s opt-in election by mail. Customers are also able to opt in over the phone, in person, or electronically.

When you include an account’s Reg E Opt-in election in the extract file imported into ODP Manager, ODP Manager can determine whether an account has already opted in or has not yet responded with a Reg E election. This means that your customers will receive the appropriate letter content based on their Regulation E Opt-in choice.

Strunk’s Welcome letter, Reinstatement letter, and Reg E Opt-In Followup letter templates make sure that your customers are aware of their options to opt in and that they know whether they already have the ATM and Everyday Debit Card transactions covered by their Overdraft Privilege limit.

The Welcome and Reinstatement letters sent when a limit is assigned or reinstated can include the Consent Form for Overdraft Services and can inform the customer of other options to opt in: by mail, online, in person, or by phone.

The ODP Manager software can identify which customers have not opted in and have an OD limit, in addition to other criteria. This allows you to communicate with these customers on an ongoing basis to send letters that explain the Reg E opt-in benefits and opt-in methods and that provide a consent form.

Strunk can also facilitate your customer’s online opt-in by creating 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.

Let ODP Manager expand your options to allow your customers to choose Overdraft Privilege coverage for ATM and everyday debit card transactions. Please contact Strunk Support at support@strunkaccess.com with any questions or for more details.

Simple and Efficient Management of the Fresh Start Loan Process using ODP Manager

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Fresh Start Loans can help customers resolve their overdrawn account status with up to four payments and can allow them to keep their checking account open. Fresh Start Loans are also a collection tool that can help financial institutions recover and collect on overdrawn accounts that might have otherwise charged off and been closed. Leveraging the tools included in ODP Manager can make managing the Fresh Start Loan process easier and more efficient.

A repayment schedule can be entered for each account with an approved Fresh Start Loan. It will include payment reminders that display when the FSL payment is due to remind your users to check if the payment has been made as agreed. Once verified, FSL payments can also be tracked in ODP Manager.

Instead of needing to create agreements outside of Strunk’s ODP Manager, the Fresh Start Loan Agreement document can be generated directly from the repayment schedule. In addition to generating the agreement from the repayment schedule, users also have an option to generate the agreement as an Ad Hoc letter.

If customers under a repayment schedule do not pay their Fresh Start Loan payments as agreed, the default close letter can be generated and tracked in ODP Manager as well. If any other Fresh Start Loan 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 a report that lists all accounts currently under a Fresh Start Loan status. 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 for more details.

Finding the way through Regulatory Requirements

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Recently, there has been a lot of confusion in regards to what is required for non-FDIC regulated financial institutions regarding their overdraft privilege program. Strunk has received several questions from our non-FDIC regulated clients (financial institutions that are regulated by either OCC, Federal Reserve or NCUA) regarding findings from either auditors or examiners.  It seems there is some inconsistency surrounding the messages these clients are receiving regarding their regulatory responsibility regarding overdraft fees.

Overdraft privilege programs are overly scrutinized from financial institutions, auditors and examiners.  It is very important for financial institutions to understand and implement applicable regulations to ensure an effective, compliant approach to their overdraft privilege program. Part of that process is knowing what your regulatory agency requirements are for your overdraft privilege program.

In 2005, the OCC, Federal Reserve, FDIC and NCUA published interagency guidance ‘Joint Guidance on Overdraft Protection Programs’ describing expectations and best practices for overdraft privilege programs. In 2010, the FDIC issued a final rule that focused on requirements and recommendations for FDIC-regulated institutions that utilized an automated overdraft privilege program. In this ruling it states that FDIC-supervised institutions should monitor their program for excessive or chronic customer use, and if a customer overdraws his or her account on more than six occasions where a fee is charged in a rolling 12 month period, then the financial institution should undertake meaningful and effective follow-up action.  Also, in this ruling the FDIC is requiring their regulated institutions to use a de minimis threshold before an overdraft fee is charged and set daily limits on how many overdraft fees that the institution can charge a customer.

To understand this, it means that financial institutions that are not regulated by the FDIC (OCC, Federal Reserve and NCUA) are not required to monitor for excessive use because these agencies have never defined what excessive use or high numbers of overdrafts are. Also, non-FDIC institutions are not required to impose a daily cap on overdraft fees, and they are also not required to set a de minimis. For non-FDIC institutions, auditors and examiners can recommend that an institution implement these items but they should never make it a requirement because there is no regulatory requirement for your institution.

Reg E Opt-In Options Presented in ODP Manager

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How are you offering your customers the chance to opt in for Regulation E to choose ATM and everyday debit card coverage for Overdraft Privilege? There are four options for a customer to consent: in person, by mail, over the phone, or electronically.

Strunk’s hosted ODP Manager software can help you provide your customers with the information they need to choose to have their ATM and everyday debit card transactions covered by ODP.

When you include the Reg E Opt-in Flag in the extract file, ODP Manager can determine if an account has already opted in or has not yet responded with a Reg E election. This allows financial institutions to provide the Consent Form to Overdraft Services to accounts that have not yet opted in. When a Welcome, Reinstatement, or Followup letter is mailed to these accounts, these letters include the A-9 Consent Form and the information about opting in by contacting you by mail, in person or over the phone, or electronically.

If a customer has already opted in for Reg E coverage, the Welcome and Reinstatement letters will remind them that their Overdraft Privilege service includes coverage of ATM and everyday debit card transactions.

If you would like to use ODP Manager to offer your customers the option to opt in on your website, Strunk can create a Reg E opt-in form that mirrors the content in your ODP Manager letters. When your customer submits the Consent Form electronically, the opt-in consent is tracked in ODP Manager, and a confirmation of the Reg E election is emailed. The ODP Manager software will also provide the Confirmation of Opt-in letter to be mailed.

Please contact Strunk Support at support@strunkaccess.com with any questions or for more details.

Top 10 Overdraft Program Questions

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Strunk offers overdraft privilege training to our clients to provide consistency on how the employees view the program and how the employees present the program to their consumers.  When providing training we will sometimes get questions on how to handle specific areas of the program. Here are the 10 most frequently asked questions during overdraft privilege training and the response to those questions.

1. Does a consumer have to opt in to have overdraft privilege on their account?

No, a consumer does not have to opt in to have the “standard overdraft practice” on their account.  The “standard overdraft practice” pay overdrafts for Checks, In-person withdrawals, ACH transactions, Pre-authorized automatic transfers, Automatic bill payments, Recurring debit card transactions, Internet banking transfers and telephone banking transactions.  A consumer only has to opt in to have their Everyday debit card transactions and their ATM transactions cover under the overdraft privilege program.

2. When does a financial institution have to take a consumer out of the overdraft privilege program for Excessive Use?

Never, financial institutions should never take a consumer out of the overdraft privilege program because they use it.  The key is not whether the account has had a lot of overdrafts, but rather, whether the account holder has made deposits sufficient to cover the overdrafts in a timely manner.

3. Does a consumer have to sign the Reg. E opt in form to have their debit card point of sale transactions and their ATM transactions covered?

No, a consumer only has to consent to have their debit card point of sale tractions and their ATM transactions covered under the overdraft privilege program.  The regulation provides for four methods to obtain an opt-in (consent): 1) by completing the form, 2) in person, 3) over the phone, and 4) electronically.  The financial institution should make the best possible use of all of these methods.

4. How can the financial institution differentiate between a recurring debit card transaction and a nonrecurring one?

Financial Institution must comply with the Reg. E rule if it adapts its system to identify debit card transactions as either onetime or recurring.  If it does so, the financial institution may rely on the transaction’s coding by merchants, other institutions, and other third parties as a one-time or preauthorized or recurring debit card transaction.

5. Do business accounts have to opt into Reg. E?

No, Reg. E is a consumer regulation.  Business accounts do not have to opt in to have their debit card or ATM transactions covered under the overdraft privilege program.

6. Does the Overdraft Privilege Joint guidance address the order in which charges are posted?

No, the Federal Register continues to assess whether additional regulatory action relating to overdraft services is needed, but nothing yet.

7. Do both parties have to opt into Reg. E on joint accounts?

If two or more consumers jointly hold an account, the financial institution must treat the affirmative consent of any of the joint consumers as affirmative consent for the account.  Similarly, the financial institution must treat a revocation of affirmative consent by any of the joint consumers as revocation of consent for that account.

8. Once a consumer pays back their Fresh Start Loan, can that consumer have their overdraft limit back?

Yes, once the consumers Fresh Start Loan is paid back in full and their account is in ‘good standings’, then their overdraft limit should be added back to their account.

 9. Can a consumer have more than 4 payments on their Fresh Start Loan?

No, a consumer can only have 4 monthly payments on their Fresh Start Loan. To qualify as incidental credit under Reg. B (for Reg. Z not to apply) and to avoid limitations under The Military Lending Act, the number of payments must be limited to 4 and no interest or fees are charged on the loan.

 10. Once an account is no longer suspended, when should that consumer get their overdraft limit back on their account?

Once a consumer account is in ‘good standing’ then that consumer should have an overdraft limit on their account.

Replace Manual ODP Letter Processes with Ad Hoc Letters

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ODP Manager uses the information from the daily extract file to create Collection letters to send to overdrawn accounts. The hosted software also generates Custom letters, for example, Welcome or Reinstatement letters, or letters confirming a Reg E Opt-In election.

In addition to Collection letters and Custom letters, ODP Manager also offers Ad Hoc letters. This letter type allows the flexibility to generate letters on an as-needed basis. 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 them set up as Ad Hoc letter templates in the ODP Manager software.

Ad Hoc letters don’t require specific account events as a trigger. When you need to generate the letter, just enter the account number and the letter will prefill with the information from the software. The letters will automatically populate with the customer name and address from the extract file. Other fields from the file can also be included. Letters can be generated one account at a time, or multiple account numbers at once. By replacing your manual ODP Letter processes with Ad Hoc letter templates, you may save time and you will also benefit from the letter tracking and retention in ODP Manager.

Please contact Strunk Support at support@strunkaccess.com with any questions or for more details.

New Due Diligence Guidance for Community Bank on FinTech Firms

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On August 27, 2021, the Board of Governors of the Federal Reserve, FDIC, and the OCC published new guidance aimed at community banks that are looking to expand their reach and service new customer bases through partnerships with financial technology companies (FinTech). While aimed at community banks, the regulators said the fundamental concepts could also be adopted by other kinds of banks and for other kinds of outsourcing partnerships. The regulators stated that the guidance was recommended but not mandatory and emphasized that it did not cover all types of third-party relationships.

The guide sets out six nonexclusive areas of due diligence that community banks should consider when engaging with FinTechs. The six key due diligence topics are: business experience and qualification, the companies’ financial condition, legal and regulatory compliance issues, risk management and control process, information security, and operational resilience.  The guide then provides direction on potential sources of information under each of the six steps and includes illustrative examples.

Business Experience and Qualifications

  • Business experience
  • Business strategies and plans
  • Qualifications and backgrounds of directors and company principals

Financial Condition

  • Financial analysis and funding
  • Market information

Legal and Regulatory Compliance

  • Legal
  • Regulatory Compliance

Risk Management and Controls

  • Risk management and control process

Information Security

  • Information security program
  • Information systems

Operational Resilience

  • Business continuity planning and incident response
  • Service level agreements
  • Reliance on subcontractors

Given the regulators’ recent and recurring emphasis on vendor management, the board of directors and senior management of all banking organizations should consider whether their vendor management policies and procedures comply with the Proposed Guidance and include the areas addressed in the Guide when engaging FinTechs.

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.