Focus on Reg E Opt-in Now More Important Than Ever

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It has never been more important to ensure that your financial institution has adequate coverage in regards to account holder Reg E opt-in. Reg E opt-in allows you to authorize ATM withdrawals and everyday debit card purchases, which may overdraw an account holder’s checking account, as long as they have provided their consent for you to do so.

Data recently released by a 2019 Federal Reserve Payments study shows that only 9% of all transactions in 2018 were from checks paid and 16% were via ACH. An overwhelming 42% of transactions were made via debit card. This decline in traditional transaction types, in favor of a debit card, means that it is extremely important to focus on the proper opt-in approach.

According to Part 205 of Electronic Fund Transfers (Regulation E), the financial institution must give “Reasonable opportunity to provide affirmative consent.”

A financial institution provides a consumer with a reasonable opportunity to provide affirmative consent when, among other things, it provides reasonable methods by which the consumer may affirmatively consent. A financial institution provides such reasonable methods, if—

  1. By mail. The institution provides a form for the consumer to fill out and mail to affirmatively consent to the service.
  2. By telephone. The institution provides a readily-available telephone line that consumers may call to provide affirmative consent.
  3. By electronic means. The institution provides an electronic means for the consumer to affirmatively consent. For example, the institution could provide a form that can be accessed and processed at its Web site, where the consumer may click on a checkbox to provide consent and confirm that choice by clicking on a button that affirms the consumer’s consent.
  4. In-person. The institution provides a form for the consumer to complete and present at a branch or office to affirmatively consent to the service.

By arming your team with the most effective procedures, you can be certain to achieve optimum opt-in for your organization. Strunk has a proven track record of achieving maximum results with financial institutions across the country. We help to more effectively reach your goals, all while remaining in compliance with applicable laws and regulations.

 

Does Your Overdraft Payment Program Have Exclusion Creep?

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For the past 27 years Strunk has been the leading provider of formal overdraft payment programs to financial institutions across the country. Many of these programs were put in place in the early to mid 2000’s, well before Regulation E changed the overdraft landscape in 2010.

Some financial institutions have let their programs die and others have put them on the back shelf as fee income derived from the service has gone down. Others continue to wonder what they can do to revitalize their 10-20 year old program.

So, what has happened? In virtually all financial institutions, the number of consumers participating in the formal overdraft program has dropped significantly. For one reason or another, the account holder has been taken out of the formal overdraft payment program. Strunk calls this “Exclusion Creep”. Virtually all of our 1,800 clients had 90%+ participation when the program was implemented but many institutions have 65-75% of their accounts in the program today.

Managing this is paramount to providing a good service to all of your customers and to maximizing fee income. Take a look at your consumer checking accounts and see if they have an overdraft limit assigned to the account. If not, re-qualify them and put them back in the program. Consumers want the service and managing the overdraft program like a line of business benefits everyone.

Does your financial institution have Exclusion Creep?

Audits and Exams and ODP, Oh My!

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An audit or exam is approaching? Use ODP Manager to help you gather the requested documentation!

Do you need to supply samples of each letter sent using ODP Manager? In Collection Letters and Custom Letters, you can generate a sample PDF of each active letter template.

For the specified review period, do you need to identify accounts with overdraft limits added or removed? Reg E opt ins or opt outs? Letters generated?  In Events, you can search for all events that occur during a specified timeframe. Use filters to narrow your results to a specific event or letter.  Not only can you identify the appropriate accounts, but you can also export the list.

Do you need a convenient summary of all the account’s information contained within ODP Manager? In Account Inquiry, export the Account Profile as a PDF – it’s a convenient way to compile the information for account officers, auditors, or examiners. It includes an overdraft summary, comments, reminders, repayment plans, and an event history. Also, the Events tab allows you to review all the account’s events and regenerate PDFs of any letters mailed to the customer.

For any Overdraft Privilege Program review, ODP Manager makes compiling the requested information easier.

 

Managing Fee Waivers and Refunds

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As the end of the year approaches, we have seen more and more clients loose potential additional fee income by waiving or refunding customer OD/NSF fees.  This is often lost income potential that is unknown to the institution. Generally most systems are set up to charge fees after the pay/return decisions have been made, so if the fees are waived the income never shows up on the general ledger as either income or the subsequent reversal of income.  Besides the reduction of fee income, waiving or refunding OD/NSF fees can also be a compliance issue.  Regulators have become increasingly sensitive to which accounts are not being held accountable for the fees that their activity dictates should be charged. For instance, if a high net worth individual is not charged overdraft (or other) fees that other accounts are routinely charged, this may be viewed as disparate treatment with all the ramifications that allegations of that nature involve.

The best solution to help alleviate both of these issues is to charge the fee “the night before”, or when the overdraft transactions are presented rather than waiting until the resolution of all items to post the fee. This helps accomplish the reduction in fee income simply because it requires more than a “click” to waive a fee, but rather a refund would need to be run for the reversal of the fee. This also allows for easier tracking of what is being given back to your account holders. With the gross fees as well as the individual refunds posting to the general ledger you can see at any given time how much the institution is giving away in fee income. From a compliance standpoint the institution is charging everyone on an equal basis – if an item overdraws the account then the account is charged – but the officer still has the discretion to refund the fee after the fact. This method is much more trackable and provides much more accountability for fee refunds.

Many of our clients cannot tell how much income they are giving back to customers each month. Part of the issue is addressed above regarding how to account for your fees and the associated waives, but the other issue is simply employees refunding fees back to customers when they ask for it, or sometimes even without them asking for it. In addition, very few institutions take the time to build reports, examine those reports, and hold their employees accountable on a consistent basis.

To assist in managing fee refunds, Strunk recommends that you implement the use of a “Refund Request Form” for employees to provide customers when they request a refund. This accomplishes multiple things. First, it allows the employee to avoid the face-to-face confrontation and having to make a snap decision. Second, it puts the emphasis for refunds back on the customer to show why it should be granted. This does not mean that we will no longer grant refunds, but we would like the customer to have to provide a valid reason why the institution should consider granting the request.

Checking Accounts that Create Value

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Free and all-you-can-eat used to be the two most powerful marketing terms in the world. Have a free picnic in the park and people from all areas of town will show up. For years financial institutions only offered free checking accounts. In fact many institutions continue offering a no frills, no fee account that people still like.

But many consumers are willing to pay a small fee for their checking account IF they receive services that have a perceived value that exceeds the monthly fee. Independent studies show that over 70% of consumers want Identity Theft Protection with credit monitoring on their account. They also want credit score reporting and certainly everyone wants/needs cell phone protection for a broken or stolen phone.

Value Checking is a unique concept that provides services that consumers want and need and they are willing to pay for them. Large institutions charge $6-$12 per month for a checking account and some will let you reduce the fee by accepting e-statements, doing a certain number of debit card transactions, or directly depositing your payroll into your checking account. Other banks and credit unions pay interest on the checking account for doing these same things.

Strategy:

1) Offer a no frills, no fee checking account for those consumers who only want a bare minimum account.

2) Add benefits to all of your other accounts and charge a small monthly fee that is less than the value of the services.

This strategy is currently working at over 700 financial institutions on nearly 10,000,000 checking accounts. Customer loyalty and fee income will go up at the same time. Contact Strunk today to learn more!

How Can ODP Manager Help You Successfully Manage Your Overdraft Privilege Program?

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Overdraft Privilege can be the largest producer of fee income for your financial institution. Think of all the features within ODP Manager as pieces of a puzzle that must all be present in order for you to manage your program successfully!

Did you know that there is a Library in ODP Manager that will provide you recommended, compliant letters and policies? By using Strunk’s templates and generating letters as due in ODP Manager, you are facilitating your program compliance. You also have access to links to all applicable laws an regulations for quick reference.

ODP Manager can also help you more effectively manage your Fresh Start Loan program. Generate collection letters that advise your account holders about the option of a Fresh Start Loan. Create the Fresh Start Loan Agreement using the account data already in ODP Manager. Track repayment plans and use payment reminders to monitor when payments should be received all within the application.

Make sure you routinely monitor the management reports in ODP Manager that summarize your Overdraft Privilege program performance. Use the Summary Report to monitor trends in your NSF and OD Fees and Refunds.

The Account Inquiry section of the software allows filtering, sorting, and exporting of your account details. It also includes standard groups that help you identify accounts to review. Use the Call List group to contact your overdrawn accounts prior to their next collection letter.

Let ODP Manager help you get the most benefit from your Overdraft Privilege program!

Doing Risk Assessments Doesn’t Have to be Daunting

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Community banks across the county struggle with the risk assessment process and generally they come in the form of Excel Spreadsheets or Word documents. Each functional area of the bank does their regulatory required risk assessment in silo’s and periodically the bank’s board reviews and approves the assessment.

Regulatory scrutiny of BSA/AML, ACH, Fair Lending, Loan Concentrations, Cybersecurity, Information Technology and other areas of the bank have caused financial institutions to spend more time and money focusing on the risks the bank faces. Some banks have declared their compliance officer the chief risk officer as a way to show the regulators that they are on top of enterprise risk management.

Outsourcing some of these functions to vendors is an expensive way to manage the risk assessment process and certainly unnecessary. Strunk’s GRC (Governance, Risk Management and Compliance) solution makes the risk assessment process easy to do and it consolidates all areas of risk the bank faces into one report.

Bank examiners often tell the community bank that they are coming out for the annual exam six weeks to two months prior to actually showing up. Generally, they ask the bank to send an extensive amount of information prior to coming onsite. This gives the regulator time to form their opinion on what risks the bank faces before arriving at the bank.

Strunk’s solution lets the bank tell their story rather than have the regulator tell the bank’s story to them. Comprehensive risk assessments are made easy with Strunk’s GRC and Vendor Management solution.

Technology Service Provider Contracts

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Understanding the increase dependence that financial institutions have on technology service providers, bank regulators have increased their efforts to require banks to appropriately handle third-party risk management.  The Federal Deposit Insurance Corporation (FDIC) has identified gaps noted by some examiners regarding several technology service provider contracts that were inadequate under existing guidance.  These contracts were missing or inadequately addressed key terms, such as:

  • Requiring the service provider to maintain a business continuity plan,
  • Lack standards for data recovery along with appropriate remedies when a recovery standard is missed.
  • Defining key terms in the contracts relevant to business continuity and/or incident response. Contracts lacking these provisions violate the Interagency Guidelines Establishing Information Security Standards, promulgated under the Gramm-Leach-Bliley Act.

Vendors that provide technology related services can create special risks to depository institutions that need to be properly addressed in their service contracts.  The FDIC indicated that it plans to hold the board and senior management of financial institutions accountable for controlling those risks in accordance with the requirements of the law and its existing regulatory guidance.

Financial Institutions should be willing to hold their service providers accountable and negotiate an appropriate contract.  All financial institutions should have provisions that they review for all of their contracts with a robust vendor management program, this will help uncover any weakness in business continuity and data recovery early in the process.

 

Why is Overdraft Protection Important

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Financial institutions across the country have to make decisions every day when it comes to accounts that show insufficient funds. Should the institutions pay an overdrawn item and take a chance the customer will pay them back or should they return or deny the transaction?

Most banks and credit unions charge the same fee whether they pay an item into overdraft status or return it to the merchant (in the case of paper checks). The question always comes up…who would want you to return the item to the merchant? Furthermore, what happens when the item is returned and what are the consequences to the customer? There is nothing good that happens when an item is returned and it only causes grief to the consumer. In this particular case, grief in the form of additional fees from the merchant or being redlined for future non-cash purchases.

Formal consumer centric overdraft payment programs started in the early 1990s and consumers have benefited greatly. Since the same fee is levied either way, the grief and embarrassment of returned checks is eliminated. For debit card or ATM transactions, consumers can decide on their own if they want the debit authorized or not. About half of a financial institution’s customers want to take the groceries or prescriptions home rather than being denied when using a debit card. Others never want to overdraw their account regardless of the situation.

This is the reason Overdraft Privilege and other forms of overdraft protection programs work. The daily overdraft decision process is easier for the financial institution and consumers like the program. A rare win-win in banking.

Strunk Applications Have a New Home

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Strunk is proud to announce the launch of https://app.strunkaccess.com/v2/ – the new dedicated URL for Strunk’s software solutions. Strunk applications are still hosted with Amazon Web Services (AWS).

With this change comes Strunk’s updated website, found at https://strunkaccess.com. Learn more about our expanded GRC offering which includes Risk Assessor, Policy Manager, Controls Manager, Vendor Manager, Issues Manager, and Skills Manager.

As a result of this domain change, clients should add @strunkaccess.com to their approved sender lists so as not to miss any valuable updates from Strunk.

The separation of the application from the public facing website will allow Strunk to serve clients more quickly and easily. Client logins remain the same and any questions should be directed to support@strunkaccess.com or 800-728-3116. Be on the look-out for our monthly releases, which include valuable feature updates and enhancements.

 

About Strunk

For more than 40 years, Strunk has developed and implemented successful profit improvement, compliance and risk management solutions for hundreds of community FIs. In addition to our core Overdraft Privilege Service, we offer other easy to use solutions that help FIs boost profitability and more efficiently identify and manage risk.

About AWS

In 2006, Amazon Web Services (AWS) began offering IT infrastructure services to businesses in the form of web services — now commonly known as cloud computing. Amazon Web Services provides a highly reliable, scalable, low-cost infrastructure platform in the cloud that powers hundreds of thousands of businesses in 190 countries around the world.

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.