When is a good time to Review your Overdraft Privilege Program

Delaying annual reviews of overdraft programs until the next rule modification or updated guidance can lead to serious and expensive issues. Preventing a problem is almost always simpler and less expensive than trying to fix it. Despite the fact that the most current guidance was issued in 2010, a lot has changed in the overdraft industry since then. The media and lawmakers have been focusing more on overdraft fees, which has brought increased attention to this financial service. Just recently Regions Bank has been fined $191 million by financial authorities for charging ‘surprise’ overdraft fees on debit card transactions and ATM withdrawals. The CFPB announced that Regions Bank “committed unfair and abusive acts and practices when it charged overdraft fees on transactions that had a sufficient balance at the time the Bank authorized the transaction but then later settled with an insufficient balance”. In August, the FDIC issued new supervisory guidance on multiple non-sufficient funds (NSF) fees arising from the re-presentment of the same unpaid transaction, charging a consumer more than one NSF fee for the same declined transaction, without providing proper disclosures.

Financial Institutions should be evaluating these areas on a regular basis. Strunk can help your financial institution reduce risk while offering this important service by using consumer-friendly policies, compliant disclosures with simple, understandable language, and constant, continuing account holder communication. We will provide a thorough analysis of your overdraft program and its disclosures and make recommendations on how to update it to meet current regulatory requirements. Your financial institution will gain greater understanding of program usage as well as practical best practices. Strunk will also provide staff training, consistent communication around the program, correct disclosures and compliance with all regulatory rules. In order to assure the success of your overdraft program, it may be time to rely on an outside expert if limited resources and other projects now demand all of your team’s focus and attention. Don’t put program assessments off and run the risk of being let down.

Is Your Bank Ready for Digital Lending?

Digital banking on the deposit side of the house has been around for years as consumers have moved away from coming into branches to make deposits. Many of them now do their banking either through the bank’s website or mobile phone. Fintechs and other non-banks are now providing consumers with the ability to get installment loans either at the point of sale or via a mobile app. Are you ready to move to digital lending?

When I started in banking in 38 years ago, bankers across the country were talking about the “checkless” society. Payments were being made by credit cards and eventually debit cards and the number of checks slowly dwindled. In fact today only about 8% of debits in the United States are paper items. Now many believe there will be a “cashless” society as well.

I was in London last week and I was amazed how further along England is than the US when it comes to the payments systems. Not once in six days did I use any British pounds to pay for anything. All payments were “tap and go” with a chip enabled Visa credit card… 39 different payments from the London Underground to meals, sightseeing tours, taxis, concessions, etc. They virtually live in a “cashless” society already. The US banking systems are behind the times.

Digital lending is here and now is the time to get onboard. Quilo recently won the “Best of Show” at the Finovate Conference in NYC attended by bankers from all parts of the globe. Quilo was also given the “Choice Award Winner” at the ICBA convention in March. If you haven’t seen how the digital installment lending platform works you are missing out.

To see how Quilo will work for your bank contact Strunk at info@strunkaccess.com for a 45 minute web demo.

Hosted ODP Manager and Individual Account Information

ODP Manager includes the ability to review the account level information for each account that has been imported into ODP Manager from your daily extract file. By using the Account Inquiry section in the hosted software, an institution’s users can view multiple accounts or details of a single account.

In Account Inquiry, users can select the view that contains the necessary columns and select groups or apply filters so only the desired accounts are shown. Once the list of accounts has been created, the data can be exported to Excel to be saved or for distribution. This information can be used to supplement ODP Manager’s existing standard reports. It also may be an alternative to creating custom reporting in the core system about accounts managed in the ODP Manager software.

Account Inquiry also allows access to the information for a single account. Since historical events are retained in the ODP Manager software, details can be viewed for both open and closed accounts. To manage the account, users may need to review an account’s contact information, event history, reminders, or comments. If the account is under a Fresh Start Loan or has charged off, users may need to view the related repayment schedule or charge-off items and recoveries.

Leveraging the information already included in ODP Manager may make it easier for your users to review and manage accounts efficiently. Please contact Strunk Support at support@strunkaccess.com with any questions or to find out more about using Account Inquiry.

 

What we know now about overdraft privilege

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.

Where Did Your Bank’s Service Charge Income Go?

Banks across the country have seen a significant drop in service charge income with as much as 50% of what it was 10 years ago. Many banks attributed the drop in fee income in 2020 to a reduction in fees charged to consumers as we worked through the pandemic.

As we analyze the service charge income number nationwide we see somewhat of a rebound in the first six months of 2022 vs. 2021 but not in all cases. For years banks have subsidized free checking accounts with overdraft income. Now the regulators are looking at banks that generate a significant percentage of their fee income from NSF/OD fees. What is wrong with this picture?

If a bank is generating very little in the way of fee income from the checking accounts they offer than the percentage of income derived from overdrafts drafts that the bank receives from stop payment, check cashing, or other service charges will be very high. Unfortunately this is very misleading and banks should correct this problem quickly. How?

Begin offering non banking benefits to your checking accounts and charge a small monthly fee on each account. Strunk’s Value Checking program has prescribed this solution since 2011 and we would be glad to do a 30 minute demo to show you how it works. Some of the largest retail banks have discontinued fees for overdrafts and now is the time to look at an alternative.

Contact Strunk at info@strunkaccess.com to set up a call to see how it would work for your bank. The regulatory and consumer banking environment is changing. Now is the time to get onboard with a decade old strategy that works.

Vendor Manager Contracts

A significant chunk of an organization’s operations are made possible through connections with third-party vendors, and the strength of these ties has a direct impact on revenue. Contracts with vendors may be just as significant in this system as those with clients. There are many differences in how businesses handle the acquisition of goods and services. While a fragmented and ineffective system might have the opposite and damaging effect, one that centralizes data and streamlines workflows can significantly enhance outcomes and enable more profitable long-term third-party relationships.

With Strunk’s Vendor Manager software and a vendor contract management plan in place you may mitigate potential risks and increase the value of your vendor relationships. Having a central area to store your vendor contract information is crucial for effective vendor management. Having access to this information will make your procurement process more efficient. Using Strunk’s Vendor Manager software has several advantages, including helping you arrange your vendor contracts, summarizing the significance of each contract, and assisting you in producing alerts and notices of Renewals.

Strunk’s Vendor Manager software also provides a place for you to store your vendor’s contract and most importantly their due diligence material. A contract scorecard is also included in the vendor management software from Strunk. This scorecard will assist you in locating any gaps in your contract and provide a space for you to record proposed improvements. The scorecard in Strunk’s vendor management software allows our clients to assign a service score for each provision by using a master service level agreement to include clauses that are common in vendor contracts. Organizations can guarantee that each step of the contract lifecycle takes place automatically based on a set process by automating their vendor contract management and compliance using a contract tracking system like Strunk’s.

 

Document Retention in ODP Manager

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.

Monitor Fresh Start Loan Repayment Schedules using ODP Manager

After the daily import of information in the extract file from your core processor, the Letters, Reports, and Account Inquiry sections of ODP Manager are updated. In addition to this updated information, the hosted software also allows you to add additional information about repayment plans manually to facilitate monitoring of account’s Fresh Start Loan payments.

If you choose to use the Fresh Start Loan repayment plan feature, after completing your Fresh Start Repayment Plan assessment and approval process, you can enter the repayment schedule information directly in ODP Manager. The data in this schedule can be used to fill in your Fresh Start Loan agreement and will make it easier to generate the document to be signed by your customer.

Once the repayment schedule has been created, Strunk’s Reminder feature will create reminders for each payment. Your Strunk software users will be able to monitor each day whether any FSL payments are due and can then check your core system to see if the payments have been made as agreed. After verifying that a payment was received, your users will track the payment date and amount in the ODP Manager software. The repayment schedule is then updated to show the payments made and the outstanding balance on the Fresh Start Loan.

Repayment plans can be viewed not only for each account, but also on a summary list that can be exported to PDF or Excel for reporting purposes. The repayment plan tracking feature in ODP Manager can help your users streamline Repayment Plan Agreement generation, Fresh Start Loan payment tracking, and repayment plan reporting.

Please contact Strunk Support at support@strunkaccess.com with any questions or to find out more about using this feature.

How can vendor risk tiering improve vendor risk management?

Understanding which providers represent the greatest “threat criticality” is an essential feature of any effective vendor risk management program, which is necessary to reduce risk and preserve business continuity. Vendor tiering allows for the implementation of this rating system that classifies vendors and doing so also imposes tighter security requirements on them.

You may improve your vendor risk management program, increase security, and build a more resilient business with the aid of vendor tiering. Vendor risk tiering improves vendor security and compliance. It makes it possible for your vendor management team to identify the vendors that offer the most risk and devote more time and effort to enhancing compliance. This enables them to streamline vendor risk management and concentrate on the areas that need the most attention, all the while making sure that any vendors you engage with adhere to the controls that need to be put in place.

Vendor risk tiering will also improve the onboarding process by incorporating vendor risk management in the onboarding process. Vendor risk tiering is essential for achieving your goals because it gives organizational structure and makes it simpler to evaluate vendors and guarantees that an efficient vendor risk management is in place.

 

Installment Lending Made Easy for Banks

How easy is it for your customers to get an unsecured loan from your bank using your underwriting criteria? Many banks provide an online application form for consumers to fill out that can be four to six pages long. Then someone at the bank reviews the data, pulls a credit bureau report, and decides whether or not the loan will be made and on what terms. This process is cumbersome, inefficient, and very costly. So costly that many banks don’t even make loans for less than $2,000.

Industry reports show that 75% of consumers want to borrow money between 5:00 pm and 9:00 am each day…when your bank is closed. So how can the underwriting, funding, collection and reporting process be automated to make these loans profitably when consumers want the money?

Bring on Quilo…Quick Installment Loans. Quilo is a lending tool that allows your bank to make instant installment loans easily and profitably right from your website. The turnkey solution is easy to implement, monitor, and it will generate new customers as well. When was the last time you had a lending solution that provided a huge competitive advantage over your competition? How about Quilo for small businesses as well?

To see how Quilo will work for your bank contact Strunk at info@strunkaccess.com or 816-225-8793 for a 45 minute web demo.