High Performing Banks Look Outside the Box

As interest rates rise and the cost of doing business increases, bankers are challenged to figure out where we go from here. Many community banks face a huge loss in their bond portfolio due to the substantial increase in rates on US Treasury securities. Liquidity can be a problem as we have seen in some mid-sized banks. Community banks haven’t seen a run on deposits although there is pressure to compete for deposits from non-bank competitors.

Service charge and fee income has increased some since the 2020 pandemic but still are near historical lows. As banking regulators continue to scrutinize “junk” fees including overdraft fees, what alternatives does a bank have? Large banks have a multitude of ways to create service charge or fee income but smaller community banks aren’t so lucky. Banks with assets over $10B have to report NSF/OD income on their quarterly call report. Any bank with a concentration of income from this source is being criticized by the CFPB. Now community banks in some states are being asked the same question. More, not less regulation is coming.

What can you do? Strunk was the pioneer for the Overdraft Privilege program beginning in 1993 and it was the best fee income idea in the history of our industry. We have several other fee income programs that many financial institutions have implemented. High performing bankers are always thinking outside the box.

Contact Strunk at 800.728.3116 or email at info@strunkaccess.com to learn more about fee income programs offered by Strunk. You will be glad you did.


Charge Off and Recovery Tracking and Reporting

After an overdrawn account has been charged off, financial institutions may still need to track and report on the charge-off balances and recoveries related to the overdrawn accounts. ODP Manager includes a manual tracking process that may allow your users to manage the charge-off and recovery process after the deposit account had been closed.

Once the account has charged off, users can create a Charge-off Item with the date, charge-off principal, charge-off fees, charge-off reason, and item status. Users can also include notes at the time the item is created and throughout the recovery process. Updates and changes are logged as well. As recoveries are made, they should be entered in ODP Manager and they will reduce the overall charge-off balance tracked.

All Charge-off Items for the last year are displayed on the C/O Items and Recoveries summary page. If a longer or shorter reporting timeframe is desired, a different default timeframe can be requested by the financial institution. Also, users can change the start and end dates at any time to change the charge offs displayed. The summary displays basic account and charge-off information. When the summary information is exported as a PDF it will overall totals and adds additional totals by branch.

Please contact Strunk Support at support@strunkaccess.com with any questions or to find out more details about using the Charge-off Items and Recoveries feature.

Does Your Bank Need More Fee Income?

Community bankers across the country are holding their breath hoping they won’t have to pay increased FDIC insurance premiums to pay for the recent $23B drain on the fund by the two large failed banks. A FDIC special assessment is coming but whether all banks will have to pay their proportionate share is still up in the air. Certainly it is not fair for community banks who are not “too big to fail” to share the responsibility of maintaining the FDIC Insurance fund at regulatory levels. Regardless, expenses at community banks are not going down.

Another concern that should be on community bankers’ minds is the percentage of service charge income they derive from non sufficient fund and overdraft fees. Since 2015, the CFPB has required banks with over $10B in assets to report their income from NSF/OD fees on their quarterly call report. Now, several states are asking smaller community banks for the same data. Banks that obtain over 50% of their fee income from NSF/OD fees are being criticized by the regulators. Some bankers are keenly aware of what is going on…others have not caught on to what they can do to mitigate this from happening. Bottom line is all bankers need to diversify their sources of fee income.

Strunk’s value added checking program will generate significant amounts of fee income while keeping free checking for those customers who want it. Since 2011, over 1,200 banks have offered the benefits added checking account to their offerings. You can expect fee income to go up by at least $40 per checking account per year. The program is easy to implement and easy to manage.

Contact us at 800.728.3116 or email at info@strunkaccess.com to learn more about fee income programs offered by Strunk. You will be glad you did.

Communicating Alternatives to Overdraft Privilege

Financial institutions are expected to monitor excessive consumer Overdraft Privilege activity in order to advise customers of alternative options to cover overdrafts.

FDIC regulated institutions are expected to give customers who overdraw their accounts on more than six occasions where a fee is charged in a rolling twelve-month period a reasonable opportunity to choose a less costly alternative and decide whether to continue with fee-based overdraft coverage. Strunk also recommends that institutions not regulated by the FDIC also communicate available alternatives to ODP on an annual basis to accounts with insufficient funds items.

The hosted ODP Manager software includes a letter template which can be used to notify customers of the available alternatives to Overdraft Privilege. The alternatives, overdraft protection credit lines and/or overdraft protection transfers from a linked account, are both described in the letter including information about associated charges or fees and whether an application or request is needed to initiate coverage.

This Excessive Use Notification letter can be generated in ODP Manager based on criteria included in the daily extract file or as needed as an Ad Hoc letter. If the file imported daily into ODP Manager includes data from the core that indicates when an account has qualified for the letter by exceeding the threshold, the hosted software can automatically show when a letter is due. If the data is not available in the extract file, letters can be generated for each account identified using an existing core report or other method.

Whether the letter is generated based on criteria or as an Ad Hoc letter, the letter will be tracked for each account and retained within the hosted ODP Manager software.

Please contact Strunk Support at support@strunkaccess.com with any questions or to find out more details about ODP Manager’s Excessive Use Notification Letter.

Strunk Response to Recent Overdraft Headlines

It is no secret that overdrafts and overdraft fees are making the news quite frequently these days. This increased attention often puts pressure on community financial institutions specifically, as the articles and reports are often unclear. Questions like, ‘is there something our FI is required to do?’ or more simply, ‘should we be doing something?’ arise.

Most recently, the Consumer Financial Protection Bureau (CFPB) has released a report stating that banks’ overdraft/NSF fee revenue has declined significantly compared to pre-pandemic levels. The CFPB stated that “Bank overdraft/NSF fee revenue was lower in 2020 and early 2021 than before the pandemic, which was likely largely due to pandemic-related stimulus checks pushing up average checking account balances. In the second half of 2021, as the pandemic stimulus wound down, overdraft/NSF fee revenue rebounded somewhat, but began decreasing again through the third quarter of 2022 – likely due to changes in bank policies.”

The CFPB states in their report that they ‘have not observed correlating increases in other listed checking account fees, which suggests that banks are not replacing overdraft/NSF fee revenue with other fees on checking accounts.’  The report identifies the largest banks in the United States, and while those banks can afford these changes, the report fails to review how this will affect community financial institutions.

It is important to understand that the comments in the report are a function of two primary things:

  1. Consumers have changed their behavior regarding overdrafts because of the pandemic.
  2. Mega banks chose on their own to drastically cut NSF and OD fees. Those banks have many revenue sources and can afford to be magnanimous, while community financial institutions do not have that opportunity.

Quite possibly the most critical message here is, there is no new regulation and nothing for the community FI to do, for now. Strunk will alert clients if any new rule making is introduced by the CFPB, and thus changes become necessary. Strunk’s overdraft program remains complaint by offering clear and appropriate disclosures, easily accessible reports and ongoing employee training.

Community FIs might still feel the strain of lost revenue and should explore new fee income strategies and profit improvement opportunities with Strunk to get out in front of this challenge. It has never been more important to shift focus and to diversify the ways fee income is produced for the community FI.

Banks see a Significant Drop in Fee Income

Banks across the country saw a steep decline in fee income derived from overdrafts in 2020 likely due to pandemic related stimulus checks that pushed up consumer’s checking account balances. It bounced back somewhat in 2021 but there was another sharp decline in 2022.

Service charges that banks derive from overdrafts hit an all time high in the late 2000’s when the industry collected over $30B annually. In 2022 that number is less than $8B according to a recent report from the Consumer Financial Protection Bureau, a 75% drop in fee income. What happened and what can our industry do?

Consumer spending habits have changed and they are less likely to overdraw their account. Also, debit card regulations changed in 2010 which made banks get confirmation that a consumer wants their debit card paid at point of sale, even though they may not have enough money in their account. This was a great regulation and it gives the consumer a choice on how they want their account handled in the case of an overdraft. It also alleviated the problem for banks when they have to decide what to do in that situation. A win-win situation for consumers and banks.

Bankers for decades have been afraid to charge fees for services received by their customers. An example would be charging a fee for a checking account. Strunk’s Value Checking program has been around since 2011 and over 1,300 financial institutions have implemented it. Very simply, add benefits to all checking accounts and charge a small monthly fee on the account. ID theft protection, roadside assistance, and cell phone coverage are some examples of valuable benefits consumers are paying for elsewhere.

Contact Strunk at info@strunkaccess.com to learn more about Strunk’s Value Checking strategy. It is very simple to implement and consumers will like the service.

Key Event History in ODP Manager

Each day, an extract file is imported into ODP Manager to update each account with the most current data from the core. After the import, the letters due and the reports will reflect the up-to-date information – but what if a user needs to review the past information for a customer’s account?

Key account events are tracked within the software with each import and letter generated. After the file import completes, each account has been updated to note if the account is now closed, if it is now overdrawn, or if it has now moved into good standing. If overdraft limits were assigned or removed, or an account has opted in or opted out for Reg E, the account is also documented. When letters are generated, the hosted software updates the account’s history with the type of letter, the letter template, and the date. A PDF of the letter is also retained and linked to the event history.

In addition to these software-generated events, ODP Manager users can create their own events in the form of comments, reminders, repayment plans, and charge-off items. These items can be viewed and updated by all ODP Manager users.

Both comments and reminders are used to note additional information about an account and can include attachments. The main difference between the two is that a reminder will allow a user to specify the due date for follow-up action. Overdue and upcoming events display under the Events section of ODP Manager. Repayment plans create reminders for overdue fresh start payments. Charge-off items track the amounts charged off by account and can also track any recoveries received.

Please contact Strunk Support at support@strunkaccess.com with any questions or to find out more details about ODP Manager’s account event tracking.

Overdraft Privilege Provides a Much Needed Service

Before the early 1990’s, banks typically returned all items that would cause an overdraft on a consumer checking account. When overdraft privilege programs started consumers were thrilled that their overdrawn items wouldn’t automatically be returned to the merchant. Thirty years later, Strunk, the pioneer of overdraft programs, is still helping banks provide efficient, compliant overdraft services to community banks across the country.

Overdraft programs have come under scrutiny since 2005 when the FFIEC published best practices for paying items into overdraft status. All of the guidance set forth by the regulators were meant to disclose the bank’s policies and to ensure those policies were followed…just like any product or service a bank offers.

In 2010 banks couldn’t automatically pay and charge for a debit card caused overdraft without consumer consent. Another great regulation! Then in 2011, the FDIC asked banks to provide notice to excessive users of overdrafts by notifying consumers each time that had six overdrafts in a twelve month period. Perfect solution to reminding customers of their bad habits!

More recently the FDIC has been concerned about disclosing second presentment fees on the same check. This occurs when an insufficient item comes through, the bank returns it to the merchant, and the merchant sends it back so they can get paid for the purchase the consumer made. Notifying consumers that a fee may be levied against the second presentment is a tremendous idea. There is also a concern that debit card transactions may be approved with a positive balance and when the item actually hits the account it is negative and an overdraft fee is charged.

Lastly, the CFPB is concerned about “junk fees” where someone makes a deposit then the check they deposited comes back insufficient. Some banks levy a charge for the insufficient deposited item even though the depositor wouldn’t have known that the check would be returned.

Contact Strunk at info@strunkaccess.com to learn more about how to run an Overdraft Privilege program in a compliant and profitable way that benefits consumers.

ODP Manager Letters as Needed

The hosted ODP Manager software uses information from a daily extract file to determine when Collection letters should be sent to overdrawn accounts and which Custom letters should be sent to accounts when overdraft limits are assigned, or accounts opt in for Reg E. In addition to the Collection and Custom Letter functionality, the software also allows users the flexibility to send Ad Hoc letters as needed. These letters don’t rely on an account event to be triggered so users are not limited to criteria included in the daily extract file.

If you close and charge off an account before the standard number of days overdrawn, you will need to be able to generate an Account Closed letter. Or you may have ODP related letters that you send in specific situations other than those covered by the standard letter templates. You can even use Ad Hoc letters to generate your Fresh Start Loan agreements. Rather than creating letters manually, you can have Strunk set them up as Ad Hoc letter templates in the ODP Manager software.

If a user has a list of accounts that need to receive the specific letter, an Ad Hoc letter can be generated using the template, and sent to the customer. When you need to generate the letter, just enter the account number and the letter will pre-fill with the information from the software – name, address, and any other relevant fields. Letters can be generated one account at a time, or multiple account numbers at once. Once the letter has been generated, ODP Manager tracks and retains the letter just like your Collection and Custom letters.

Please contact Strunk Support at support@strunkaccess.com with any questions or to find out more details about using ODP Manager’s Ad Hoc letters.

Thirty Years of Overdraft Privilege

In 1993 Strunk began their Overdraft Privilege program which was designed to save consumers money and help banks become more operationally efficient. Thirty years later many banks continue to provide the service and their customers appreciate the program.

When a small business or consumer has a written a check or debit on their account that exceeds the account balance a bank can either pay the item taking the account negative or return or deny the transaction at point of sale. In either case the bank typically charges the same whether they pay it or return it…about $25-$35 based on the bank’s pricing schedule.

When a check is returned and a bank levies a fee the only thing this causes is havoc for most consumers. The check was written to pay a mortgage or rent, make a car payment, or to pay for groceries or prescription drugs. If the bank returns the non sufficient fund item it could cause the customer to have bad credit, get thrown out of their rental, not being able to take the food home to their family or pay for the much needed drugs from the pharmacy. These are real life situations and in each case the retailer or merchant charges a fee for that returned item…typically $35-$50 per item. Can’t think of anyone who would want a bank to return the check, can you?

If someone is using a debit card to buy something (as debit card transactions have become more prevalent in the past decade) the bank simply denies the transaction at point of sale if the purchase will overdraw their account. I doubt if anyone wants to put the groceries back on the shelf.

Overdraft Privilege is a win-win situation. Consumers get to take whatever they purchased home and the bank’s operations department doesn’t have to decide who to pay and who to return the overdraft on.

Contact Strunk at info@strunkaccess.com to learn more about how Overdraft Privilege can benefit your bank and your customers.