ICBA Live Winner of the Banker’s Choice Award 2022: QUILO

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Strunk team members were thrilled to once again, be a part of the Independent Community Bankers Association’s biggest event, ICBA Live, hosted this year is San Antonio. This year, Strunk was proud to be a part of the team that introduced Quilo to the ICBA. In addition, Strunk was able to highlight their overdraft service and best-in-class governance, risk and compliance solution.

Quilo has been selected to be a part of the ICBA’s ThinkTECH Accelerator program, a community bank-focused fintech accelerator run in partnership with The Venture Center. The highlight of the ICBA Live event was certainly Quilo winning the ICBA’s Banker’s Choice Award for 2022!

Digital technology should be a top priority and Quilo is the #1 solution on the market – an all-digital loan and payment platform empowering community financial institutions to offer POS financing directly to account holders.

Quilos can be used for new purchases online or in store, to pay down credit card balances, or to replenish a checking account for debit card purchases. Account holders will experience stress-free, instant access to funds via the digital experience online and on mobile devices, while CFIs will enjoy net income up to 5% ROA.

If you have not had the chance to take a look at Quilo yet, now is the time!

To learn more please visit https://strunkaccess.com/landing-pages/quilo/

The consumer case for overdraft privilege

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The last few years lawmakers have put extensive focus on overdraft privilege programs and are pushing for additional guidance on the way financial institutions handle overdrafts. It seems that the lawmakers that are pushing for changes only have one way of looking at overdraft privileges, so The American Bankers Association (ABA) wrote a response to the two overdraft research reports that the CFPB issued on December 1, 2021 with some additional data.

First, lawmakers have pushed the narrative that consumers do not want overdraft privilege and that the CFPB constantly gets complaints regarding overdrafts.  The facts show that in 2020 less than 0.15% of CFPB complaints were related to overdrafts.  The ABA reports found that 90% of adults find their bank’s overdraft protection valuable and that 23% of consumers intentionally overdraw their account to cover expenses. A Morning Consult study found that ½ of Americans think overdraft fees are fair and Curinos research found that 62% of consumers would reconsider their support for new regulation of overdraft if it limited access to the service.

Additionally, lawmakers believe that overdraft fees are not fair and are very expensive for consumers.  The ABA reports show that 62% of adults state overdraft fees are reasonable while only 21% state that overdraft fees are unreasonable.  Also, in the ABA report it states that 72% of adults were happy their payments were covered. The CFPB and lawmakers believe that low income consumers suffer the consequence of overdraft fees more than those who are financially comfortable by a large margin. The recent ABA report found that 25% of adults say they have paid an overdraft fee in the past year and that consumers across income brackets are equally likely to have paid an overdraft in the past year.  Post-grads are more likely to overdraw their account than regular college degree or those without a college degree.  According to an article that Indeed posted in 2021, employees who have a post-grad degree make well over double than that of an employee who only has a high school diploma.  The ABA reports found that lower-income households (<$24k annual deposits) avg 10 items paid into overdrafts annually versus 18 items for consumers in the highest income stratum (>$60k annual deposits).  Another point that the ABA report highlights is that lower-income consumers receive more fee waivers and refunds than higher-income consumers.

Before any new regulations around overdraft privilege are done, lawmakers need to look at the economic impact that such action will cause.  Currently overdraft users realize an economic benefit of over 7 to 1, providing annual stimulus to the economy of $65.6B.  Without overdraft privilege consumers lose $443 in purchasing power for each returned check or ACH transaction.  Some larger financial institutions have made changes to their overdraft privilege programs due to fear of potential changes in the regulation and because of competition.  The banks that have already announced changes are expecting hundreds of millions of dollars in lost revenue.  How will these financial institutions make up for this loss of revenue – will they increase other fees or will they have to decrease staffing to meet stockholders’ expectations? Only time will tell.

Strunk at the ABA’s Conference for Community Bankers 2022

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For the first time in two years, the American Bankers Association hosted the Conference for Community Bankers in person February 20-22. Strunk’s associates were pleased to see old faces and new and to gather in the beautiful location of Palm Desert, California.

There were many engaging sessions offered, with a focus on community banks establishing use of Fintech solutions to remain competitive. In addition to highlighting their overdraft service and best-in-class governance, risk and compliance solution, Strunk introduced Quilo to this audience for the first time. Quilo is an all-digital loan and payment platform for community banks to offer POS financing direct to their account holders.

Quilos can be used for new purchases online or in store, to pay down credit card balances, or to replenish a checking account for debit card purchases. Banks can also set up alternative payment technology among their merchant clients as an additional revenue stream.

Customers will experience stress-free, instant access to funds via the digital experience online and on mobile devices, while banks will achieve an ROA up to 5%. ABA member banks were excited to learn about this new program that is truly a win-win for account holders and bankers alike.

For more information on Quilo, visit https://strunkaccess.com/landing-pages/quilo/.

Tracking Charge-Off Items and Recoveries

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ODP Manager is updated daily, through the extract file import process, with the current information from the core processor; however, your users may benefit from some of the hosted software’s manual tracking features to monitor other data as well.

If your users need a better tool to manage the charge-off and recovery process after the deposit account has been closed, the Charge-Off Items and Recoveries feature included in ODP Manager may be helpful.

Once an account has charged off, you can create a charge-off item to track the charged off principal and fees. Notes can be added when the item is created or throughout the recovery process. Updates and changes are also logged. When recoveries are made, they should be entered in ODP Manager, reducing the overall balance tracked.

To monitor the overall status of charge-offs and recoveries, a summary screen displays basic charge-off information and status. By default, ODP Manager displays the Charge Off Items for the last year, but a different timeframe can be selected by specifying a start date and an end date. For reporting purposes, the charge-off item summary can be exported as a PDF.

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

Overdraft Protection In a New Light

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Over the past year, there has been a great deal of scrutiny surrounding overdraft privilege programs. Many news articles focus on the potential negative aspects of overdraft privilege programs. They make the generalization that users of these programs are not sufficiently educated on what usage truly means and that users are typically lower-income.

A 2019 survey from Fiserv shows that 91% of consumers report that they are familiar with their financial institution’s overdraft policy. Strunk has historically stated that clear communication with consumers regarding key elements of the financial institution’s overdraft privilege program is not only important from a compliance perspective, it will also improve program performance. This allows consumers to be more familiar with the program features and limits.

A research paper published by The American Bankers Association provides statistics that show the inconsistencies in data that most articles use characterizing heavy overdraft users as lower-income consumers. The paper states that lower-income households (<$24,000 annual deposits) averaged 10 items paid into overdraft annually vs 18 items for consumers in the highest income level (>$60,000 annual deposits). Lower-income account holders receive more fee waivers and refunds than higher-income consumers and paid lower effective average overdraft charges. Either way, this study shows that consumers of all income categories utilize overdraft programs.

Another argument commonly made in regards to overdraft programs is that consumers find the fees unfair. A common example given that usually describes an overdraft activity is a consumer might buy a $2 cup of coffee and get hit with a $35 fee. In reality, the average size of a purchase that triggers an overdraft fee has nearly quadrupled from $50 to almost $200 in recent years. It is simply not accurate that consumers are getting charged for small purchases. Additionally, a Morning Consult study found that about half of Americans think overdraft fees are fair.

A study by Curinos research found that more than 60% of overdrafts come from consumers who intend to use the service. Likewise, more than 80% of overdraft transactions come from consumers who opted-in to debit card overdraft transactions (Regulation E) with the clear intention of using it to cover their payments. Furthermore, two-thirds of consumers indicate that, while overdraft can be expensive, they don’t want to see reductions in their access to the service or limits. This indicates that consumers understand that if they overdraw their account, having the financial institution pay the overdraft item for them and charge them a fee is a greater benefit to them than returning that item and still charging the consumer a fee. This prevents the consumer from having to pay additional fees to the retailer and potential re-presentment fees.

Less than .15% of complaints to the CFPB were related to overdraft privilege in 2020. Overdraft privilege programs give consumers services that they need and want while also giving them options, which is best for all consumers.

Inform Your Customers About Their Regulation E Opt-In Options

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The Consent Form for Overdraft Services (A-9 form) provides your customer with the information they need to know about overdrafts and overdraft fees. In addition to serving as a disclosure of the appropriate information, it also facilitates a customer’s opt-in election by mail. Customers are also able to opt in over the phone, in person, or electronically.

When you include an account’s Reg E Opt-in election in the extract file imported into ODP Manager, ODP Manager can determine whether an account has already opted in or has not yet responded with a Reg E election. This means that your customers will receive the appropriate letter content based on their Regulation E Opt-in choice.

Strunk’s Welcome letter, Reinstatement letter, and Reg E Opt-In Followup letter templates make sure that your customers are aware of their options to opt in and that they know whether they already have the ATM and Everyday Debit Card transactions covered by their Overdraft Privilege limit.

The Welcome and Reinstatement letters sent when a limit is assigned or reinstated can include the Consent Form for Overdraft Services and can inform the customer of other options to opt in: by mail, online, in person, or by phone.

The ODP Manager software can identify which customers have not opted in and have an OD limit, in addition to other criteria. This allows you to communicate with these customers on an ongoing basis to send letters that explain the Reg E opt-in benefits and opt-in methods and that provide a consent form.

Strunk can also facilitate your customer’s online opt-in by creating a Reg E opt-in form and Reg E opt-out form that mirrors the content in your ODP Manager letters. You would then add links to these forms to your website.

Let ODP Manager expand your options to allow your customers to choose Overdraft Privilege coverage for ATM and everyday debit card transactions. Please contact Strunk Support at support@strunkaccess.com with any questions or for more details.

Simple and Efficient Management of the Fresh Start Loan Process using ODP Manager

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Fresh Start Loans can help customers resolve their overdrawn account status with up to four payments and can allow them to keep their checking account open. Fresh Start Loans are also a collection tool that can help financial institutions recover and collect on overdrawn accounts that might have otherwise charged off and been closed. Leveraging the tools included in ODP Manager can make managing the Fresh Start Loan process easier and more efficient.

A repayment schedule can be entered for each account with an approved Fresh Start Loan. It will include payment reminders that display when the FSL payment is due to remind your users to check if the payment has been made as agreed. Once verified, FSL payments can also be tracked in ODP Manager.

Instead of needing to create agreements outside of Strunk’s ODP Manager, the Fresh Start Loan Agreement document can be generated directly from the repayment schedule. In addition to generating the agreement from the repayment schedule, users also have an option to generate the agreement as an Ad Hoc letter.

If customers under a repayment schedule do not pay their Fresh Start Loan payments as agreed, the default close letter can be generated and tracked in ODP Manager as well. If any other Fresh Start Loan letters are needed for accounts in a repayment status, an Ad Hoc letter template can be created. By entering the deposit account number, ODP Manager will pre-fill the account information. After the letter is generated, it will be tracked and retained in ODP Manager just like the other Collection and Custom letters.

ODP Manager includes a report that lists all accounts currently under a Fresh Start Loan status. If details are needed about current repayment schedules, a Repayment Schedule summary report can also be exported to PDF or Excel.

Please contact Strunk Support at support@strunkaccess.com with any questions or for more details.

Finding the way through Regulatory Requirements

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Recently, there has been a lot of confusion in regards to what is required for non-FDIC regulated financial institutions regarding their overdraft privilege program. Strunk has received several questions from our non-FDIC regulated clients (financial institutions that are regulated by either OCC, Federal Reserve or NCUA) regarding findings from either auditors or examiners.  It seems there is some inconsistency surrounding the messages these clients are receiving regarding their regulatory responsibility regarding overdraft fees.

Overdraft privilege programs are overly scrutinized from financial institutions, auditors and examiners.  It is very important for financial institutions to understand and implement applicable regulations to ensure an effective, compliant approach to their overdraft privilege program. Part of that process is knowing what your regulatory agency requirements are for your overdraft privilege program.

In 2005, the OCC, Federal Reserve, FDIC and NCUA published interagency guidance ‘Joint Guidance on Overdraft Protection Programs’ describing expectations and best practices for overdraft privilege programs. In 2010, the FDIC issued a final rule that focused on requirements and recommendations for FDIC-regulated institutions that utilized an automated overdraft privilege program. In this ruling it states that FDIC-supervised institutions should monitor their program for excessive or chronic customer use, and if a customer overdraws his or her account on more than six occasions where a fee is charged in a rolling 12 month period, then the financial institution should undertake meaningful and effective follow-up action.  Also, in this ruling the FDIC is requiring their regulated institutions to use a de minimis threshold before an overdraft fee is charged and set daily limits on how many overdraft fees that the institution can charge a customer.

To understand this, it means that financial institutions that are not regulated by the FDIC (OCC, Federal Reserve and NCUA) are not required to monitor for excessive use because these agencies have never defined what excessive use or high numbers of overdrafts are. Also, non-FDIC institutions are not required to impose a daily cap on overdraft fees, and they are also not required to set a de minimis. For non-FDIC institutions, auditors and examiners can recommend that an institution implement these items but they should never make it a requirement because there is no regulatory requirement for your institution.

Reg E Opt-In Options Presented in ODP Manager

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How are you offering your customers the chance to opt in for Regulation E to choose ATM and everyday debit card coverage for Overdraft Privilege? There are four options for a customer to consent: in person, by mail, over the phone, or electronically.

Strunk’s hosted ODP Manager software can help you provide your customers with the information they need to choose to have their ATM and everyday debit card transactions covered by ODP.

When you include the Reg E Opt-in Flag in the extract file, ODP Manager can determine if an account has already opted in or has not yet responded with a Reg E election. This allows financial institutions to provide the Consent Form to Overdraft Services to accounts that have not yet opted in. When a Welcome, Reinstatement, or Followup letter is mailed to these accounts, these letters include the A-9 Consent Form and the information about opting in by contacting you by mail, in person or over the phone, or electronically.

If a customer has already opted in for Reg E coverage, the Welcome and Reinstatement letters will remind them that their Overdraft Privilege service includes coverage of ATM and everyday debit card transactions.

If you would like to use ODP Manager to offer your customers the option to opt in on your website, Strunk can create a Reg E opt-in form that mirrors the content in your ODP Manager letters. When your customer submits the Consent Form electronically, the opt-in consent is tracked in ODP Manager, and a confirmation of the Reg E election is emailed. The ODP Manager software will also provide the Confirmation of Opt-in letter to be mailed.

Please contact Strunk Support at support@strunkaccess.com with any questions or for more details.

Top 10 Overdraft Program Questions

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Strunk offers overdraft privilege training to our clients to provide consistency on how the employees view the program and how the employees present the program to their consumers.  When providing training we will sometimes get questions on how to handle specific areas of the program. Here are the 10 most frequently asked questions during overdraft privilege training and the response to those questions.

1. Does a consumer have to opt in to have overdraft privilege on their account?

No, a consumer does not have to opt in to have the “standard overdraft practice” on their account.  The “standard overdraft practice” pay overdrafts for Checks, In-person withdrawals, ACH transactions, Pre-authorized automatic transfers, Automatic bill payments, Recurring debit card transactions, Internet banking transfers and telephone banking transactions.  A consumer only has to opt in to have their Everyday debit card transactions and their ATM transactions cover under the overdraft privilege program.

2. When does a financial institution have to take a consumer out of the overdraft privilege program for Excessive Use?

Never, financial institutions should never take a consumer out of the overdraft privilege program because they use it.  The key is not whether the account has had a lot of overdrafts, but rather, whether the account holder has made deposits sufficient to cover the overdrafts in a timely manner.

3. Does a consumer have to sign the Reg. E opt in form to have their debit card point of sale transactions and their ATM transactions covered?

No, a consumer only has to consent to have their debit card point of sale tractions and their ATM transactions covered under the overdraft privilege program.  The regulation provides for four methods to obtain an opt-in (consent): 1) by completing the form, 2) in person, 3) over the phone, and 4) electronically.  The financial institution should make the best possible use of all of these methods.

4. How can the financial institution differentiate between a recurring debit card transaction and a nonrecurring one?

Financial Institution must comply with the Reg. E rule if it adapts its system to identify debit card transactions as either onetime or recurring.  If it does so, the financial institution may rely on the transaction’s coding by merchants, other institutions, and other third parties as a one-time or preauthorized or recurring debit card transaction.

5. Do business accounts have to opt into Reg. E?

No, Reg. E is a consumer regulation.  Business accounts do not have to opt in to have their debit card or ATM transactions covered under the overdraft privilege program.

6. Does the Overdraft Privilege Joint guidance address the order in which charges are posted?

No, the Federal Register continues to assess whether additional regulatory action relating to overdraft services is needed, but nothing yet.

7. Do both parties have to opt into Reg. E on joint accounts?

If two or more consumers jointly hold an account, the financial institution must treat the affirmative consent of any of the joint consumers as affirmative consent for the account.  Similarly, the financial institution must treat a revocation of affirmative consent by any of the joint consumers as revocation of consent for that account.

8. Once a consumer pays back their Fresh Start Loan, can that consumer have their overdraft limit back?

Yes, once the consumers Fresh Start Loan is paid back in full and their account is in ‘good standings’, then their overdraft limit should be added back to their account.

 9. Can a consumer have more than 4 payments on their Fresh Start Loan?

No, a consumer can only have 4 monthly payments on their Fresh Start Loan. To qualify as incidental credit under Reg. B (for Reg. Z not to apply) and to avoid limitations under The Military Lending Act, the number of payments must be limited to 4 and no interest or fees are charged on the loan.

 10. Once an account is no longer suspended, when should that consumer get their overdraft limit back on their account?

Once a consumer account is in ‘good standing’ then that consumer should have an overdraft limit on their account.

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.