Is Your Overdraft Program Meeting the Needs of Your Account Holders?

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Strunk’s Overdraft Privilege program has helped financial institutions streamline the daily overdraft payment process for the past 27 years. Consumers would much rather have you pay an item into overdraft status than return it to the merchant…which only causes them grief. For debit card transactions that consumers want paid rather than denied at the point of sale, financial institutions must obtain consumer consent before paying those items and charging an overdraft fee.

The Overdraft Privilege Revitalization Program with Strunk ensures that a financial institution’s overdraft payment program is consumer friendly and compliant with current regulations and best practices. Like all bank services, overdraft payment policies and procedures should be fully disclosed to consumers, giving them a choice on how they want their account handled.

Our services include a four stage approach: 1) Review existing policies and procedures for paying overdrafts; 2) Make recommendations to improve the process; 3) Implement the time tested and proven strategies to ensure a high level of service and 4) Train your employees on the benefits of a fully disclosed overdraft privilege program.

Our recommendations cover four areas as well: 1) Compliance; 2) Account Holder Service and Education; 3) Operational Efficiency; and 4) Fee Income Enhancement.

Is it time to review your program to ensure what you are doing is meeting the needs of your account holders? Strunk has worked with over 1,800 financial institutions nationwide to help them implement a formal, fully disclosed overdraft payment process.

Importance of an Overdraft Privilege Service Policy

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Consumers should be provided an Overdraft Privilege Service Policy which discloses the limit, fees, and general practices before any limit is assigned, in addition to the standard deposit agreement and fee schedule. The Service Policy needs to be provided at program launch, new account opening or when a consumer account qualifies for Overdraft Privilege.

Disclosing your Overdraft Privilege Program clearly to the consumer in a Service Policy is a key element to any Overdraft Privilege Program.  Having an Overdraft Privilege Service Policy is important from a compliance perspective and it will also help improve the program’s performance because consumers will be more familiar with the features and limits.

Most financial institutions that have an Overdraft Privilege program either don’t have a Service Policy or they have a Service Policy that is not consistent with their other disclosures.  It is always important to be consistent with terminology regarding your program because these are sensitive points with regulators who fear use of different terminology could be confusing/deceptive for the consumer.

Strunk has a standard Overdraft Privilege Service Policy that we offer to our clients and is backed by our compliance guarantee.  Policies should be reviewed and approved by the Board of Directors annually, and as a Strunk Access client, your institution is entitled to assistance in ensuring your policy complies with any regulatory changes that may have occurred during any given year.  Strunk believes it is always better to voluntarily describe the specific benefits, features and limitations of products and services; and to tell consumers what the rules are.

ODP Manager Features to Streamline your Fresh Start Loan Process

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ODP Manager includes tools that may help you manage your Fresh Start Loan process.

For each account in a Fresh Start repayment plan, you can add the Fresh Start Loan repayment schedule. Payment reminders are created that display when due to remind you to check if the payment has been made as agreed. Once the payment is received, you can track the payment amount and date.

Also, you can easily create the Fresh Start Loan agreement using the ODP Manager account information and repayment schedule. Even if you choose not to track repayment schedules, you can still streamline FSL agreement creation by generating the document using ODP Manager.

The standard letter templates include an FSL Default close letter. If an account under a repayment schedule has defaulted and must now be closed and charged off, this letter can be generated and tracked in ODP Manager.

Do you send other Fresh Start Loan letters to accounts in repayment status? An Ad Hoc letter can be created for you to generate as needed – just enter the deposit account number and the letter will pre-fill with the account information. Once it is generated, it is tracked and retained within ODP Manager just like your Collection and Custom letters.

ODP Manager also includes a Fresh Start Tracking report that lists all accounts with a Fresh Start Loan Repayment ODP Status code. Use this report to monitor accounts currently in repayment or to identify accounts that have paid the Fresh Start Loan in full and should be reassigned an overdraft limit.

Let ODP Manager make managing your Fresh Start Loan process easier!

Consistency in Overdraft Privilege Training

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Overdraft Privilege programs have been around since the early 1990’s and they continue to benefit both consumers and financial institutions. Consistent and proper training of all employees on the benefits and pitfalls of a successfully run program remains important as we work through the Covid-19 pandemic.

Strunk has always recommended that all frontline personnel be trained on the features and benefits of operating an overdraft privilege program on an annual basis or as needed as turnover occurs. Returning overdrawn items on accounts only causes havoc for consumers and very few people want their paper debits denied when presented, even if it overdraws their account. For electronic debits including ATM and debit card transactions, financial institutions must obtain consumer consent before paying those items that cause an account to go negative. This gives consumers a choice on how they want their account handled.

Training should include the procedures on how your institution handles non-sufficient fund (NSF) items. Make sure that your procedure follows the institution’s policy on NSF items. Each employee opening new accounts should clearly convey how your bank’s overdraft program works. Pursuant to Regulation E, obtain opt-in if a consumer wants electronic items paid at point of sale rather than those debits being denied. Denied transactions keep the consumer from taking the groceries or prescription drugs home when using their debit card.

New accounts personnel also need to clearly discuss the fees associated with overdrawing the account.

Capping the total number of overdraft fees charged on a consumer account on any day is a best practice that is recommended by regulators. Also, waiving fees on small overdrawn amounts is also recommended.

Ongoing training is good for any service that your institution offers and consumer complaints are minimized when policies are transparent and communicated frequently. If you haven’t trained your employees on the features and benefits of your bank’s overdraft payment program, now is a great time to do so.

Strunk is pleased to announce addition of FFIEC CAT Tool assessment component

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Financial institutions are at risk for an increasing amount and sophistication of cybersecurity breaches and threats. For this reason, the Federal Financial Institutions Examination Council (FFIEC) created a Cybersecurity Assessment Tool to help institutions identify the risks they face and to be sure they are prepared in the event they are faced with one of these events.

Strunk is pleased to announce the addition of this FFIEC Cybersecurity Assessment Tool to its Risk Assessor module. The feature is comprised of both the Inherent Risk Assessment and Maturity Assessment sections. Maturity Assessments are organized into domains: Cyber Risk Management and Oversight, Threat Intelligence and Collaboration, Cybersecurity Controls, External Dependency Management, and Cyber Incident Management and Resilience. Users must score their organizations on each question to determine their overall risk level. The Strunk approach to the assessment streamlines an otherwise cumbersome process so that financial institutions can much more easily complete these assessments and identify their maturity level.

Strunk CEO Dan Roderick says, “The FFIEC CAT is required for all financial institutions annually, so we are very happy to add this feature to Risk Manager at no additional charge to our clients.”

Clients have been using Risk Assessor to complete regulatory required internal risk assessments in days rather than weeks. The solution is preloaded with key risk indicators for BSA, ACH, Fair

Lending, Cybersecurity, Compliance, Asset Quality and much more. Call report data from your institution is automatically uploaded to the program quarterly to substantiate the risk. Concise board reports are easy to read and understand highlighting areas of high risk your bank faces.

Current Risk Assessor clients will receive the FFIEC CAT Tool for no change in their annual fee.  Please contact us if you are interested in viewing a demo of the tool.

Can Strunk’s ODP Manager Software Lighten Your Load?

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Do you have employees now working from home? If you are using Strunk’s hosted ODP Manager software, this may allow you to adapt to changing work schedules or locations and easily give new users access. If you are a current ODP Manager client but do not have the hosted version, the upgrade is free!

Enjoy the benefits of a hosted solution. No more application software to support on your own network. No more worries about server and other support software becoming outdated. ODP Manager is upgraded monthly – requiring no support on your end – the upgrades are seamless and automatically available to your users. It doesn’t get any easier.

If you need a more efficient file import process, another huge benefit of the hosted solution is that you can import your extract file directly from your core processor while your users are not on premise. We encourage you to take advantage of ODP Manager’s Automatic Upload option – if your core can generate your extract file automatically then Strunk can help you set up the file import for a scheduled time each day. Then the data will already be imported and available when your users start their workday.

You may be unable to print letters every day or you may be trying to prioritize which letters can be printed at home versus ones that can wait to be printed from your normal branch location. Strunk can help you determine which letters are required and which letters may be omitted. We can also help you make any necessary letter content changes.

ODP Manager can save your reports within the software. Ask us to set up archived reports – then you can refer back to the daily reports as you have time available. Implementation of these strategies should help with the remote management of your ODP program.

 

Overdraft Programs During the COVID-19 Pandemic

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Overdraft Privilege has been a staple for consumers for the past 27 years and paying items into overdraft status is better than returning them to the merchant or denying the consumer the ability to take home the groceries or prescription drugs.Given the recent circumstances our country is facing Strunk’s Overdraft Privilege program can help consumers and financial institutions get through these difficult times.

In ad hoc overdraft payment programs financial institutions decide to pay or not pay an overdrawn item and whether to charge a fee or not. These types of programs can be discriminatory and may lead to disparate treatment for some customers. In our formal overdraft privilege program those customers who are in the program want their items paid and they don’t mind paying you a fee. In essence you are saving them the return check charge from the merchant or the hassle and embarrassment of being denied at the point of sale.

Certainly there are times when waives or refunds are warranted. Make sure you have a documented policy that outlines the considerations to factor into the refund decision. Also, keep the authority to grant a refund as tight as possible – the more people with authority the greater chance of disparate treatment.

Strunk’s recommended Fresh Start Loan can be used as a tool to help consumers get back on their feet during financial hardships. If a consumer is unable to pay back an overdraft immediately we recommend allowing them to pay it back over four installments. The zero percent interest loan can be used at any time to help consumers pay back an overdraft over time rather than immediately like it is in most financial institutions.

Four installments could be weekly, monthly, bi-monthly or quarterly. Working with your customer to help them work out of a tight cash flow situation will strengthen the relationship and keep the negative information from affecting their credit score. More importantly, you will keep their checking account open under difficult times. Now more than ever, managing the day-to-day overdraft process as a line of business is a must and your customers will appreciate the service you are providing.

Setting the record straight on excessive use

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Lately, there has been a lot of confusion around consumers who ‘abuse’ the overdraft privilege program from our clients.  Our clients have asked us what they should do for their consumers who use the overdraft privilege program on a regular basis and what are the recommended compliance and regulatory practices they should follow for these consumers.

The first thing that we tell our clients is that overdraft privilege is a discretionary service, which primarily means that our clients are not obligated to pay any item.  With respect to both making the service available to consumers and taking it away from consumers, it is very important to be very consistent in applying your policy when managing your overdraft privilege program.  We tell our clients if they are not consistent with their program then desperate or discriminatory treatment could result from this action.

It is very important to understand that only the FDIC has guidance around ‘excessive use’ of overdraft privilege programs. If you are not regulated by the FDIC, then there are no specific rules regarding what a financial institution needs to do in case of excessive use.  FDIC regulated institutions need to notify a customer who overdraws their account on more than six occasions where a fee is charged in a rolling twelve-month period.  One thing to understand is there are no requirements to close an account or take any other specific action to accounts that use overdraft privilege on a regular basis.  Examiners or Auditors that push financial institutions to take action on these customers are really taking regulation into their own hands.

Strunk’s recommendation has always been to utilize the specifics that are outlined in our overdraft privilege service policy.  The only reasons for revocation of overdraft privilege are the reasons outlined in the service policy, otherwise coming up with arbitrary reasons to revoke certain customers access could be challenged.

Policy Management Made Easy

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Banks are required to have each and every policy approved by the board of directors on an annual basis. Many financial institutions keep their policies in Word or PDF documents on the back credenza of the officer in charge of each area of the bank. Operational and compliance policies are in the operations area of the bank; lending policies are in the chief lending officer’s file cabinet and accounting policies on the cashier’s desk.

On average, banks have between 40-60 policies that are reviewed throughout the year by the bank’s board and any changes to the policies are updated after board approval. This process can be cumbersome and hectic for most community banks. It doesn’t have to be that way!

Strunk has put together a terrific solution for managing the annual review and policy approval process. Rather than maintaining separate folders of policies, why not have them in one place with access to those who need to read, make changes, or review them periodically? That is what Strunk’s Policy Manager Program does.

Keeping a log of changes for senior management, outside auditors, or the regulators is important. Making updates or changes to policies should be easy to do. Redlined copies of the policies go to the board for approval. Your board only wants to review changes made to policies, not the entire policy. Strunk’s solution does all of this and policies are put into chapters based on each functional area of the bank. You send us your policies; we do all of the work. Access to each policy is given based on user access code. Contact us for a quick demo of the cost effective, yet comprehensive Policy Manager solution.

Make ODP Manager Letters and Events Work for You!

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Have you considered how you may customize ODP Manager for your institution?

Do your users need the ability to share information about ODP Manager accounts? ODP Manager allows users to create account comments and reminders. These events are available to all users and you can even add attachments! Overdue reminders are easily viewed each day when logging in.

Are there ODP related letters that you are generating manually? An Ad Hoc letter can be created for you to generate as needed – just enter the account number and the letter will pre-fill with the account information in ODP Manager. Once it is generated, it will be tracked and retained within ODP Manager just like your Collection and Custom letters.

Would you like the letter signature and contact information to change based on the account’s assigned branch? ODP Manager can do that for you!

Would you like your ODP letters to show your logos and footers instead of printing on letterhead? Would you like a user’s signature to print on your letters? If you provide your image files or text, they can be included in your ODP Manager letter templates.

Let ODP Manager help your users streamline account notation and letter generation by implementing these suggestions.

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.