Important Regulatory Announcement

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As you may know, on September 17, 2024 the CFPB issued a circular regarding ‘Improper Overdraft Opt-In Practices’. This circular outlines the CFPB’s guidance related to obtaining Reg E opt-in from consumers. In short, it represents a significant change to the interpretation of Reg E Opt-In requirements.

Since Reg E requirements took effect on July 1, 2010, the practice for obtaining opt-in outlined by Strunk has passed muster with every regulatory authority including the FDIC, OCC, Fed, and NCUA. Over that entire period of time – over 14 years – we have never had a client cited for not properly obtaining Reg E opt-in. The foundation of this practice was essentially twofold – FIs were to provide the consumer with the Reg E A-9 form and then follow up with a notice produced from ODP Manager sent to the consumer confirming their opt-in and once again telling them they have the option to opt back out. The A-9 was to be provided to every consumer upon account opening or request to opt-in. The confirmation notice history is maintained in ODP Manager.

Evidently, after 14 years, the CFPB has determined that in order to provide evidence that the confirmation was obtained from the consumer, the A-9 form must be signed or initialed. They also outline that opt-ins provided over the telephone must be recorded and opt-ins obtained online or via mobile app must be stored and signed with an electronic signature. The specific language in the CFPB circular is as follows:

  • For consumers who opt into covered overdraft services in person or by postal mail, a copy of a form signed or initialed by the consumer indicating the consumer’s affirmative consent to opting into covered overdraft services would constitute evidence of consumer consent to enrollment.
  • For consumers who opt into covered overdraft services over the phone, a recording of the phone call in which the consumer elected to opt into covered overdraft services would constitute evidence of consumer consent to enrollment.
  • For consumers who opt into covered overdraft services online or through a mobile app, a securely stored and unalterable “electronic signature” as defined in the E-Sign Act (15 U.S.C. 7006(5)) conclusively demonstrating the specific consumer’s action to affirmatively opt in and the date that the consumer opted in would constitute evidence of consumer consent to enrollment.

Although the CFPB technically only has supervisory authority over FIs with assets in excess of $10B, and no regulator has the authority to issue new regulations, in the current environment it is our view that it is highly likely that each of the respective regulatory authorities for financial institutions will adopt this same ‘guidance’ and administer their examinations accordingly. That being the case, we urge you to adopt the approach outlined in the three bullets above when obtaining consumer opt-in for Reg E. Specifically, what this means is:

  • For consumers who opt in via postal mail or in person – have them sign or initial the A-9 form:
  • For consumers who opt in via telephone, make sure your calls are recorded, and those recordings are retained.
  • For consumers who opt in online or via mobile device, store the transaction along with electronic signature. Strunk supports an online opt-in process, which can be tracked within ODP Manager. Please contact us if you would like us to configure that capability for your institution.

With respect to existing consumer account holders, the same rules all apply. So, if you do not have the physical evidence outlined above for consumers who currently are coded as opted in for Reg E, you must contact those consumers to obtain the affirmative consent outlined above. If those consumers do not provide the necessary confirmation, we would recommend removing their Reg E opt in from your system and discontinue approving their Reg E overdraft transactions and charging fees.

Use ODP Manager Data to Generate Letters as Needed

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The hosted ODP Manager software includes three types of letter templates: Collection, Custom, and Ad Hoc letters. Collection letters are sent to accounts that are currently overdrawn with a negative balance. Custom letters are focused on communicating Overdraft Privilege Program-related information to customers. Ad Hoc letters allow ODP Manager users to generate letters as needed without relying on an account event to trigger the letter.

By using Ad Hoc letter templates, institutions can eliminate manual processes of creating and addressing letters outside of ODP Manager. To generate the letter, users will need a list of accounts that should receive the letter template. Each letter template can be generated one account at a time, or multiple account numbers can be entered at once. The customer’s name and address information will populate from the most recent ODP Manager extract file imported. Additional letter data fields can also be populated with information stored in ODP Manager. Once generated, the letter will be retained inside the hosted software just like Collection letters and Custom letters.

If accounts are closed and charged off before the standard number of days overdrawn, users will need to generate an Account Closed letter to appropriately notify the customer. There also may be some specific situations that require ODP-related letters that are not covered by the standard Collection and Custom letter templates. Ad Hoc letters can also be used to generate a customer’s Fresh Start Repayment Plan agreement. The inherent flexibility of the Ad Hoc letter template feature may allow institutions to accommodate all Overdraft Privilege Program-related letters – not just letters included in the standard Collection and Custom letters.

If you have any questions about setting up and using Ad Hoc letters in hosted ODP Manager, please contact Strunk Support at support@strunkaccess.com for more details.

Today’s Overdraft Environment

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In today’s financial environment, having access to emergency funds is more crucial than ever. Many individuals are struggling to cover everyday expenses, and overdraft privilege can offer reassurance to customers who require fast access to short-term funds. Consumers, especially those who use overdraft services, continue to show a strong understanding of overdrafts and the options available to them. Consumers would much rather have their transactions paid for than returned. In either case, the financial institution will charge a fee. In the last two years, just over half of consumers have needed immediate access to funds to pay their bills. Political leaders tend to believe that overdraft privilege only affects lower-income consumers, but consumers earning between $100,000 and $150,000 also need access to short-term emergency funds. This is not a matter of wealth, but rather of having access to available cash. For consumers with accounts at financial institutions, having access to cash when needed is crucial. The benefit of not paying a fee unless they use the service is the type of access they are looking for.

Half of all account holders will need help with liquidity at some point. Consumers can’t predict when they will need access to emergency funds, but they want to be certain that if a crisis arises, it will not have a long-term effect on them or their credit. More than 60% of overdrafts come from consumers who intend to use the service and appreciate the value it adds to their checking account. Consumers are looking for a solution without a long-term commitment, such as credit card debt or a personal loan, and overdraft privilege provides that to them. Having access to additional funds when a consumer is in need is highly beneficial, and they do not want to experience any reductions in their ability to use the service. Approximately 30% of consumers use overdraft services, indicating a sustained demand for this offering. It is crucial for financial institutions to provide alternatives within their framework, such as Overdraft Privilege, Line of Credit, and a transfer from another account so that consumers can manage their fees and protect their income. Additionally, a repayment program is available to assist consumers who are having difficulty with their budgets, providing them with extra time to repay their overdraft limit. Strunk offers Overdraft Privilege consulting services and the best software to ensure your Overdraft Privilege program is an ongoing success.

Can Community Banks Compete?

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More than 10,000 banks have vanished in the last forty years and the trend is frightening as we get close to 4,000 banks left in our country.

Some of the reasons for this drop can easily be explained such as bank failures and mergers of multi-bank holding companies. Of course banks in rural markets have sold as bank owners get older and no family member is there to continue the family legacy. But, many banks sell because they think they no longer can compete with larger banks. This is nonsense!

Bank regulations are never ending and continue to hamper the ability to compete. Costs associated with running the bank such as core processing, compliance and employee expense seem to rise each year. What can be done about it? Have you turned over every rock to see what other banks are doing?

Strunk is an expert in delivering fee income and net interest income programs that hundreds of banks have implemented. We have a variety of services that have been time and market tested. Overdraft Privilege is the program we are best known for with over 1,800 bank clients.

Secure Checking is the “overdraft privilege” of the 2020’s. It will deliver similar fee income as ODP did in the 2000’s. Our loan and deposit pricing tool will deliver similar numbers to the bottom line in the way of net interest income.

Strunk is here to help banks make more money. Contact Strunk at 800.728.3116 or email at info@strunkaccess.com to learn more about income programs offered by Strunk. You will be glad you did.

Why use Strunk’s Issue Manager instead of Excel

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How does your financial institution keep track of internal and external audit findings, customer complaints, and comments from regulators that require corrective action? Many financial institutions use Excel spreadsheets to monitor these outstanding issues. It’s no surprise that financial institutions rely on Excel for these tasks, as it remains one of the most widely used business software programs out there. Most employees find Excel convenient and believe it meets their needs for issue tracking.

Many financial institutions may not be aware of the risks and downsides of using Excel as their main document for tracking audit findings, customer complaints, and regulatory comments. Excel currently lacks a clear visual history of file updates, requiring users to save multiple versions of a file to track changes. This leads to numerous duplicate copies, time wasted on figuring out the latest version, and a high risk of lost data. Furthermore, the process can be disrupted when key personnel responsible for the Excel spreadsheet leave the business without providing proper instructions. As regulators demand complete audit trails and transparency, Excel cannot meet this requirement. Another issue with Excel is its lack of access control tracking, which can lead to unauthorized access, data corruption, or accidental deletion. Managing Excel spreadsheets is a manual, time-consuming, and highly inefficient process. With labor costs constantly rising, financial institutions are beginning to understand that increasing employee productivity by using efficient software solutions can significantly impact their bottom line.

Strunk’s Issues Manager module can help your financial institution to solve the problem of tracking audit findings, customer complaints, and regulatory comments in Excel. Strunk’s hosted solution allows financial institutions to track issues that arise and assign responsibility to associates within the organization. Issues Manager also enables you to attach documents, assign priority and due dates, and track the status of the issues within the solution, while generating reports for auditors or external use. Contact Strunk if you would like to automate your issue tracking in a secure environment that creates full audit trails.

Leverage Extract File Date Fields to Filter Results

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The daily extract file imported into hosted ODP Manager includes many fields that may assist with managing an institution’s Overdraft Privilege program. These fields are used to show letters due and also to populate the standard suite of reports included in ODP Manager. In addition to these purposes, institutions may also benefit from using this data to display filtered results of accounts that share specified criteria. These additional filter options may facilitate monitoring of accounts in specific areas of interest.

The first step to leveraging additional filter and group options is to decide which fields and criteria should be applied to the accounts. Once determined, there are three main areas in ODP Manager that are able to use the additional filter groups: account-level Reports, Account Inquiry, and Custom Query.

Users can apply the filters as needed by typing the desired criteria in the filter boxes displayed below the ODP Manager header rows. If users are entering the same criteria regularly, it may be more efficient to request the creation of an institution-specific query group. Once the individual column filters have been applied or the query group selected, users can view the information in the browser, export the filtered results to either Excel or PDF in Reports, or to Excel in Account Inquiry and Custom Query.

In Account Inquiry, users can choose from three different views to select which extract file fields are available for filtering or export. Both the Default View and Original View display different sets of commonly used fields. The All Fields View displays all fields mapped and available in the hosted software.

If an institution’s users need to limit not only the results displayed but also specify which columns are included, a Custom Query can be created. This Custom Query can be downloaded daily (or as needed) to Excel and will include the accounts that meet the specified criteria.

If you have any questions about setting up additional filter groups in hosted ODP Manager, please contact Strunk Support at support@strunkaccess.com for more details.

How to Replace Lost Fee Income for Banks?

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Strunk has helped over 2000 banks increase their bottom line from a variety of income producing programs that started in 1993 with their Overdraft Privilege program. The service benefited both consumers and banks and although income is down from NSF/OD fees it still remains popular even after tremendous regulatory scrutiny.

In 2010, banks were required to obtain consumer consent before charging an overdraft fee for a debit card transaction that overdrew the account. Service charge income went down significantly. In 2011 FDIC regulated banks had to notify consumers after every 6th overdraft charge in a rolling twelve month period. Service charge income went down again.

More recently banks have discontinued charging NSF fees if their core processor can’t determine if the item had already been presented. Some banks have discontinued allowing consumers to overdraw their account and they have eliminated overdraft fees. To total all of these changes up our industry has seen more than a 50% drop in service charge income in the past 15 years.

What can a bank do about it? Strunk’s Secure Checking program allows consumers to get highly sought after services from their bank while paying a small monthly fee for their checking account. Banks see a net increase in income per checking account of $50 per year. Strunk’s Loan and Deposit Pricing tool will help banks increase net interest income by at least 25bp. For a $100M loan portfolio that is $250K per year.

Strunk is here to help banks make more money. Contact Strunk at 800.728.3116 email at info@strunkaccess.com to learn more about income programs offered by Strunk. You will be glad you did.

Strunk is pleased to announce partnerships with several state banking associations across the country

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Strunk is pleased to announce partnerships with several state banking associations across the country. The Community Bankers Association of Georgia, Kansas Bankers Association, Kentucky Bankers Association, Missouri Bankers Association, Nebraska Bankers Association, Tennessee Bankers Association, and the Independent Bankers Association of Texas have all provided endorsement of Strunk’s latest offering, Pricing Manager.

Pricing Manager is a fully hosted, web-based solution that allows banks to deploy a tool to all lenders to ensure they are armed to price loans profitably and consistently based on target profitability objectives.  It also provides the ability to understand the details of relationship profitability so better pricing decisions can be made.  Pricing Manager will increase your bank’s net interest income by 25-50 basis points.

Pricing Manager offers lenders the ability to vary rate, fee, risk premium and term structure among other variables, to understand the drivers of profitability and develop pricing options for borrowers that all achieve the target ROE for all types of loans. Deposit relationships can be included to see how much ‘pricing power’ each brings to the loan or total relationship. The solution contains built in assumptions for loan origination, loan servicing and cost of funds which can all be customized.

According to Strunk’s Chief Executive Officer, Dan Roderick “Until about two years ago, pricing was fairly straight forward for most banks, given historically low interest rates and record high liquidity. However, that has changed dramatically, as should a bank’s approach to pricing. Liquidity, which not long ago was far from a consideration, is now becoming a concern for many banks. Also, economists are beginning to predict tightening commercial credit largely due to a downturn in commercial real estate values – particularly for office space and retail properties – which will impact the risk profile of these loans and should have a corresponding impact on pricing.  At no point in history has proper loan pricing been more important.”

Pricing Manager will:

  • Arm lenders with the tools needed in an increasingly competitive environment.
  • Provide clients with pricing offers that will win more deals.
  • Increase net interest income by 25-50 basis points.
  • Allow you to factor relationship profitability into pricing decisions.
  • Allow instant pricing strategy adjustments in a shifting rate environment and ensure pricing consistency.
  • Produce rate sheets for consumer loans and interest-bearing deposits.

Strunk is providing free demonstrations of the Pricing Manager solution for interested banks. Please visit https://strunkaccess.com/pricing-manager/ or contact Strunk at info@strunkaccess.com to learn more.

 

 

Regulation E Option to Opt In Online

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Strunk’s ODP Manager recommended custom letter templates include copies of the Consent Form for Overdraft Service. This allows consumers that have not already opted in the opportunity to opt in to authorize and pay overdrafts for ATM and everyday debit card transactions. Customers should have the option to opt in or opt out of Reg E by phone, by mail, or in person. If available, consumers should also be able to opt in to Reg E electronically.

If a financial institution’s online banking does not already offer customers the ability to choose to opt in or opt out, the hosted ODP Manager software can provide an electronic option. An online form will be created that matches the content in the ODP Manager letter templates. Once created, the form will be linked on the institution’s website. Customers can electronically complete the form to consent to opt in to or opt out of the ATM and everyday debit card coverage. After submitting the form, both the customer and a designated institution email address will receive a confirmation of the request.

After the request is submitted, ODP Manager users will regularly review new requests tracked in ODP Manager. The list of requests can be exported so that the accounts can be updated appropriately in the core system. The hosted software is able to identify new responses that have not yet been downloaded. Once downloaded, the software still retains the prior responses within the ODP Manager software.

If you have any questions about setting up online Reg E Opt-In and Reg E Opt-Out forms in hosted ODP Manager, please contact Strunk Support at support@strunkaccess.com for more details.

Should Lenders Price Their Own Loans?

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Bankers should consider several factors when pricing loans that meet the bank’s profitability target and also win the deal. Often times when asked what the rate is for commercial loan, a banker will give the same rate regardless if the loan is for $2M or for $250K. In other words many banks price their loans based on the type of loan and not the size. This is a mistake.

Size matters. So does the term, fees, risk, return to the bank and cost of funds. Does the customer have other loans or deposits with the bank and are they profitable? Do your lenders know what the cost to originate or service the loan is? How can they price the loan if they don’t know these things?

Competition is fierce especially for the A rated borrowers. Community banks saw finance companies and car dealerships steal installment lending from them in the 1990’s. Farm Credit is a huge competitor for Ag real estate loans. How can a bank possibly compete with rates they offer your customers? The short answer is you can.

With net interest margins narrowing, now is the time to look at a loan pricing solution that takes all of these factors into consideration. Don’t lose another deal due to price before you look at how you can compete and meet your profitability goals.

Contact Strunk at 800-728-3116 or email at info@strunkaccess.com to learn about how our loan pricing tool will increase net interest income by at least 25 bp.

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.