Use ODP Manager to Inform Customers about Reg E Opt-In

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On consumer accounts, ATM and everyday debit card transactions cannot be included in Overdraft Privilege unless the customer has opted in. Customers can opt in for Reg E at account opening but they may also opt in later. The four options to opt in for the ATM and everyday debit card coverage are: in person at a branch, over the phone, by mail, or electronically.

The Consent Form for Overdraft Services (A-9 form) informs customers about what they need to know about overdrafts and overdraft fees. It also reiterates a customer’s options for opting in and provides them the form to submit by mail. ODP Manager allows institutions to provide an account’s Regulation E Opt-in Status in the file that is imported daily. This allows the hosted software to send different letter templates to customers who have opted in or not opted in for the ATM and everyday debit card coverage.

Strunk’s standard letter templates for the Welcome and Reinstatement letters include the A-9 form for customers who have not already opted in. The Reg E Opt-in Followup Letter template is also provided so that customers with OD limits that have not opted in receive information about ATM and everyday debit card coverage opt-in at least once a year. If a customer has already opted in, their letters highlight that they already have the ATM and everyday debit card coverage. By allowing customers the Reg E opt-in information when overdraft limits are assigned, when overdraft limits are reinstated, or annually, ODP Manager may allow customers to have more opportunities to opt in for Reg E.

ODP Manager can also allow customers to submit their Reg E Opt-in election electronically. Strunk would create an online form that mirrors an institution’s A-9 form. This form would then be linked directly from an institution’s website. Email confirmations are generated when forms are submitted. The submissions are tracked in ODP Manager so that users can generate a list of accounts that need an updated Reg E election.

If you have any questions about the Reg E Opt-in form options in hosted ODP Manager, please contact Strunk Support at support@strunkaccess.com to find out more.

Vendor Management Breakdown

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Over the years, banking partnerships with FinTechs have grown in number and complexity. Third-party risk management has become a growing focus for supervisory and enforcement agencies in recent years. To facilitate the increase in such relationships, the Board of the Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), have released a final joint guidance to assist institutions in mitigating risks linked with third-party relationships.

Although it is stated that the guidance does not have the authority to impose new requirements on banking organizations, each agency will still assess their supervised banking organizations’ risk management of third-party relationships as part of their regular supervisory procedures. This includes evaluating the level of risk and the effectiveness of risk management to ensure that all activities comply with relevant laws and regulations and are conducted in a secure and sound manner. The guidance also emphasizes that corrective measures, such as enforcement actions, may be taken by the agencies if there are any violations of laws and regulations or unsafe banking practices by the banking organization or its third party.

Strunk’s Vendor Manager software has undergone a review to ensure that it aligns with the Final Guidance for efficient management of third-party relationships. Strunk has proposed some areas of improvement to enable our clients to clearly outline the structure of each third party and identify potential risks, as well as the appropriate measures to manage them easily. With our latest release on September 6th, 2023, you can view the new upgrades that have been added.

Here, you can find a document comparing the Interagency Guidance of Third-Party Relationships: Risk Management with Strunk’s Vendor Manager software. https://app.strunkaccess.com/v2/document/347

Loan Pricing Tool That Will Increase Net Interest Margin

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Historically, loan pricing solutions for community banks were not affordable and only the larger or regional banks used them. The competition for lending generally dictates the rate offered to the customer. There are several factors that go into loan profitability but the three main drivers are the risk of the borrower, size of the loan, and term of the loan.

Here is an example of how a loan pricing solution can help your bank win more deals. A community bank shared a recent deal that they lost due to pricing/structure of the loan. The bank had a client that was purchasing a dump truck and wanted to borrow $100K. The bank offered Prime – 1% (7.5%) fixed with a five year amortization and a 1% upfront fee. The borrower who had $25K in deposits and no other relationship only wanted to pay 7.25% with no fee on the loan.

The bank did not have a pricing solution to determine the profitability of the loan/relationship so their line in the sand was Prime – 1% with a $1K fee. The borrower went elsewhere for the $100K loan (the $25K deposit hasn’t left the bank yet…as of this writing) and the bank lost out on the interest income.

After running the loan opportunity through Strunk’s Loan Pricing solution, the bank should have made the loan at 7.25% with no fee since it would result in a 17.95% annualized return…rather than let their customer go somewhere else. The net income from this one lost loan opportunity would more than pay for the Strunk loan solution for a whole year.

Now is a great time to look at an inexpensive, easy to use loan pricing tool to see if it is a fit for your financial institution. Increasing your Net Interest Margin is easy. Contact Strunk at 800.728.3116 or at info@strunkaccess.com to learn more about our loan and relationship pricing solution.

Know the Importance of a Relationship’s Profitability

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Pricing can be a challenge for all community financial institutions. Most CFIs overprice their largest, most valuable customers and underprice their smaller, least profitable customers. This can be an alarming prospect, since as a result we end up giving the best deal to those who contribute the least to the bottom line and at the same time run the risk of losing our most profitable relationships.

Understanding the drivers of profitability on commercial customer relationships and making decisions based on that knowledge is of the utmost importance. Strunk’s Pricing Manager solution provides a robust relationship profitability feature to assist with determining the profitability of each customer quickly and easily.

The solution contains ROE targets that are used to determine the return on capital. ROE is what really matters most to our shareholders. These targets are customizable by product type and not only drive profitability, but also consistency across all loan types and lenders. Additionally, utilizing these drivers effectively will allow you to structure deals that work for the bank while at the same time, work for the borrower as well.

Strunk’s Pricing Manager also allows users to model the deposit relationship associated with each borrower and will illustrate whether that deposit brings any pricing power to the overall relationship. Positive profitable deposits add value for the bank and a pricing tool prevents lenders from using deposits as an excuse to price down a loan.

Pricing Manager is a powerful tool, it is affordable, and comes with a Money Back Guarantee! Contact us today at 800-728-3116 or info@strunkaccess.com for a demo of the all-new Pricing Manager or click here to learn more.

Viewing and Exporting Summary Information in ODP Manager

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Strunk’s hosted ODP Manager software utilizes the information contained in the daily extract file to assist users in the daily tasks of generating Collection and Custom letters and reviewing customer accounts for Overdraft Privilege limit assignment or removal. The software also includes a standard suite of Management Reports that can be used daily, monthly, or quarterly to monitor and review the data important to running a successful Overdraft Privilege program.

There are two important metrics to focus on related to ODP program performance: percent of accounts with an ODP limit and percent of accounts opted in for Regulation E ATM and everyday debit card coverage. When logging in to the hosted software, these metrics show on the Dashboard. There is a comparison between the institution’s benchmark values and other Strunk clients by the 25th, 50th, and 75TH percentiles. The trend for the Percent with Limit and the Percent Opt In is also updated monthly. Both the Dashboard benchmarks and the trend information can be exported as a PDF. More detailed summaries by branch and by product can be reviewed on the Utilization Analysis and the Opt-In Impact management reports.

Some of the management reports include account-level detail: Overdraft Aging, New Accounts, ODP Status Tracking, Fresh Start Tracking, and ODP Heavy Users. When ODP Manager shows a list of accounts in reports or in Account Inquiry, users have the option of using column filters or groups to limit displayed results to specified criteria. These reports can be exported to PDF in Reports or to Excel in Reports and Account Inquiry. The option to filter allows users to leverage the data included in the extract file to monitor a smaller group of accounts – even if there is not an existing report.

In addition to searching results at the account level, ODP Manager also allows users to search events records. Import events such as accounts becoming overdrawn or in good standing, OD Limits assigned or removed, or Reg E opt ins or opt outs can be searched using filter criteria or date ranges. Filtering by event details or date ranges can also be done for user events such as letters generated, comments, or reminders.

If you have any questions about options to view and export your data in hosted ODP Manager, please contact Strunk Support at support@strunkaccess.com to find out more.

Defining Continuous Overdraft Fees

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What exactly are continuous overdraft fees, and how could they potentially impact your Overdraft Privilege Program? It is important to be aware that certain financial institutions apply continuous overdraft fees, also known as daily overdraft fees. These fees are charged on a periodic or daily basis for as long as the account remains overdrawn. Currently, the financial service industry is actively discussing the problem of continuous overdraft fees. This is mainly due to the numerous lawsuits filed against financial institutions regarding their predatory overdraft practices.

Regulators have found that Overdraft programs which charge a fixed or periodic fee for not resolving a previous overdrawn balance can be unfair and deceptive, according to Section 5 of the FTC Act. This is especially true when the financial institution doesn’t disclose the situations in which customers could incur these fees accurately. These practices make it harder for consumers to avoid the fees by bringing their account balance back to positive if they’re facing cash flow issues.

If a financial institution intends to charge continuous overdraft fees, it must first review the information they provide to its consumers about overdraft services. According to the CFPB’s guidance, if a financial institution’s disclosures state that overdraft fees may be charged “after” a specific number of days, the financial institution should consider whether their system guarantees that such fees will not be charged on or before the indicated day. Therefore, testing transactions is crucial to ensure that the fees charged are clear and understandable to the average consumer. Additionally, the CFPB guidance advises financial institutions to consider how they handle continuous overdraft situations that occur over weekends or holiday periods where the final day to cure an overdraft falls on a non-business day. The guidance explains that if a financial institution assesses a fee based on calendar days but only allows overdrafts to be cured on business days, it could be problematic if the financial institution’s disclosures state that consumers have a certain number of days to cure an overdraft before a fee is assessed.

What happens when financial institutions charge continuous overdraft fees? This practice has faced regulatory scrutiny and lawsuits against financial institutions. Strunk acknowledges the potential risks involved in imposing such fees, and it’s crucial for all institutions to be aware of these issues. If your financial institution is still charging a continuous overdraft fee, it may be beneficial to contact Strunk at info@strunkaccess.com for assistance with our overdraft privilege program.

Time to Implement a Loan Pricing Solution

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When pricing commercial loans most bankers say they have to match the competition or they use some benchmark such as the prime rate. Others say they use the “flinch method”. They throw out a rate and see if the customer “flinches”.

Bank CEO’s often wonder if commercial lenders work for them or for their customers when it comes loan pricing. Lenders want to get the deal and many times they don’t consider the bank’s costs associated with making the loan when offering the rate/terms. Do lenders have the tools to offer a rate that meets both the borrower’s needs and bank’s profitability goals?

Many factors should be considered when making pricing decisions on commercial loans: Type of loan, amortization term, usage of a line of credit, fees, cost to underwrite and service the loan, risk, fixed, adjustable or floating rate, borrower’s other business with the bank and most importantly the size of the loan.

Relationships matter and we have to value that in the pricing equation. What other loans or business does the borrower have with the bank? Do they have a deposit relationship and is it in interest or non-interest bearing? What we typically find is banks over price their best customers and under price their smallest least profitable customers.

Now is a great time to look at an inexpensive, easy to use loan pricing tool to see if it is a fit for your financial institution. Increasing your Net Interest Margin is easy. Contact Strunk at 800.728.3116 or at info@strunkaccess.com to learn more about our loan and relationship pricing solution.

How Can Strunk Assist with Vendor Management

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When it comes to evaluating third-party risk management, financial institutions can use their own methods to determine the level of risk for each partnership. The regulators understand that not all relationships require the same level of scrutiny, and it is important to recognize vendors with high and critical risks. At Strunk, we have created a vendor risk assessment in our Vendor Manager software that provides financial institutions with a baseline risk level for each vendor. This assessment takes into account the criticality of the vendor’s product and services and the risk associated with them. By analyzing the risk associated with each third-party relationship, financial institutions can maintain consistent monitoring and remediation strategies to prevent risks from occurring.

To effectively manage vendor risk, it is crucial to assess the controls put in place by vendors. Strunk’s Vendor Manager software offers vendor surveys that capture the controls in place for their risk. This tool also helps identify any gaps in the controls, enabling financial institutions to determine the residual risk posed by the vendor to their organization.

Our software aligns with interagency guidance and provides valuable assistance to financial organizations in implementing third-party risk management. It covers planning, due diligence, contract negotiation, ongoing monitoring, and terminating the relationship. With Strunk’s Vendor Manager software, financial institutions can manage the operational, compliance, and strategic risks associated with third-party relationships. For more information on Vendor Manager visit Strunk’s site to request a demo.

Permit Customers to Make Regulation E Elections Online

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ODP Manager custom letter templates include the Consent Form for Overdraft Services for customers who have not already opted in for the Reg E ATM and everyday debit card coverage. These letter templates simplify the process for customers who choose to opt in by mail, but ODP Manager can also allow your customers to opt in for Regulation E electronically.

The hosted software can be set up to include a Reg E opt in form and Reg E opt out form that matches the content in your ODP Manager letter templates. The links are then added to the institution website to direct customers to the Reg E opt in and opt out forms. Email confirmations are generated when customers visit the website and complete the form to opt in or opt out of the ATM / everyday debit card coverage. The request is tracked in ODP Manager and can be emailed to a specified email address at your financial institution.

Once a customer request has been made, ODP Manager users perform the following steps: 1.) Review the new responses in ODP Manager, 2.) Export the list of accounts that need an update to the account’s Reg E election, and 3.) Perform the appropriate maintenance in the core system – the user will update the account record in the core to opt in or opt out the account as requested by the customer. The ODP Manager software displays by default any new responses that have not been reviewed and downloaded. Requests that have already been processed are also retained within ODP Manager to allow review of prior responses.

If you would like to implement the electronic consent to opt in for Overdraft Privilege coverage for ATM and everyday debit card transactions in ODP Manager, please contact Strunk Support at support@strunkaccess.com with any questions or to find out more.

How Does a Formal Overdraft Program Benefit Consumers

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Formal overdraft programs are prevalent in community banks and consumers have benefited from them for over 30 years. Many articles have been written about the pitfalls and risks that consumers face from overdrafts and some of them are true. In reality, providing a consistent methodology to paying items that create an overdraft benefit both banks and their customers.

Consumers create overdrafts…banks do not. Banks are faced with decisions each morning to either pay a customer’s non-sufficient fund item or return it to the merchant. They also have to decide whether or not to charge a fee or waive the fee. Thirty years ago when formal overdraft programs started, the NSF or Overdraft fee was $15-$20 nationwide. The idea was to charge a fee to deter consumers from writing a check that would overdraw their account. This was a time when debit cards were not used much and checks and ACH items dominated the payments system.

Beginning in 2010, debit card transactions that would overdraw an account could not be authorized at point of sale unless the consumer “opted in” for this service. This was a great idea that came from the Federal Reserve. So, how do formal overdraft programs benefit consumers?

• Allows consumers to decide how they want their bank account handled when it comes to overdrafts
• Reduces returned check charges from merchants
• Allows consumers to take home the groceries or prescription drugs when otherwise their debit card transaction would be denied
• Keeps a bank from discriminating on daily pay and don’t pay decisions
• Keeps a bank for discriminating on waives and refunds

Contact Strunk at 800.728.3116 or email at info@strunkaccess.com to learn more about setting up a formal overdraft process at your bank.

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.