Strunk

Standard Reports Available in ODP Manager

April 17, 2024/in Banks, Compliance, Credit Unions, Financial Services, Markets, Overdraft Privilege, Perspectives/by Melissa Newbury

Strunk’s ODP Manager hosted software includes a standard suite of reports that summarize the information from the most recent extract file imported. These reports can be used by management and by daily users to analyze ODP Program performance and assist with program compliance.

The Summary Report includes totals for overdrawn and not overdrawn accounts, number of accounts by ODP Status Codes, and recommended totals for overdrawn accounts reserve by branch and product. A trend graph displays the accounts with limit, the used commitment, and aggregate privilege over time. NSF and OD Fees and Refunds are also displayed in bar charts. Additional overdrawn account information and reserve information is summarized in the Overdraft Detail Report and the Overdraft Aging Report.

The Overdraft Aging and New Accounts Reports show individual accounts that should be reviewed daily to determine the assignment and removal of overdraft limits. The Fresh Start Tracking Report allows users to monitor accounts with Fresh Start Repayment Plans. The Letters Printed YTD report allows your institution to track the total number of letters and which letter templates are generated by month and year.

The Status Tracking and Heavy OD Users Reports show accounts that do not currently have overdraft limits assigned. These accounts should be reviewed at least quarterly to determine if the accounts now meet the qualifying criteria to be assigned an OD Limit. Consistent review of these accounts will help maintain a high percentage of eligible accounts in the Overdraft Privilege Program.

The Utilization Analysis, Opt-In Impact Analysis, and LOC/Sweep Analysis reports focus on performance analysis. These reports include a Branch Summary and Product Summary table. Monitoring the percent of accounts with overdraft limits and the percent of accounts opted in for Regulation E is very important to maintaining or improving ODP program performance. The LOC/Sweep Analysis Report allows comparison of the number of accounts with ODP to the number of accounts with other options to cover overdrafts, such as lines of credit or sweeps from other deposit accounts.

If you have any questions about reports available in hosted ODP Manager, please contact Strunk Support at support@strunkaccess.com to find out more.

Highlight on the American Bankers Association’s Poll Regarding Overdrafts

April 10, 2024/in Financial Services, Markets, Overdraft Privilege, Perspectives/by Joel Lawrence

Legislators are continuing to push for changes in overdraft fees, which they describe as unnecessary and even predatory. They have dubbed these fees as “junk fees.” We know that overdraft fees are not “junk fees,” but rather a convenience for informed consumers. The American Bankers Association (ABA) has pushed back, stating, ‘The administration’s latest attempt to suggest that highly regulated bank fees already disclosed under federal law are ‘junk’-or even illegal- continues to mislead the American people’. According to a survey conducted by Morning Consult from March 8-10, 2024, for the ABA, most Americans have a positive view of the current banking and financial services available to them. The survey specifically revealed that a strong majority of Americans appreciate the value and convenience of bank overdraft programs.

Consumers are more knowledgeable than ever about their banking products. More than two-thirds of consumers (67%) find their bank’s overdraft protection valuable, compared to only 16% who do not per the survey. 8 in 10 consumers who have paid an overdraft fee in the past year were glad their bank covered their overdraft payment, rather than returning or declining payment. Consumers understand the immediate consequences of a returned payment, such as the embarrassment of not being able to pay at a restaurant or other places. They also understand the long-term repercussions, such as late fees, repossessions, tax penalties, or even evictions. If overdrafts are no longer allowed, banks will be able to make up for lost revenue through other means, but consumers may not be able to recover from a financial mistake. According to the Morning Consult survey, 64% of consumers find it reasonable for banks to charge fees for overdrafts, while only 23% don’t think it’s justified. Close to 75% of the participants consider overdraft fees reasonable when it comes to larger payments like mortgages or rent payments are covered and paid on time or protected from late fees or penalties. Overdraft protection provides seamless financial support when needed, making it important to preserve.

Policymakers continue to believe that consumers don’t understand how overdraft protection works or that they don’t have access to their account information. According to the survey, almost 90% of consumers find it easy to check their account balance to avoid overdrawing their accounts. Additionally, two-thirds of consumers are aware that they can opt-out of receiving overdraft protection at any time after they have accepted the service. This is in contrast to only 7% who mistakenly believe that customers are obliged to stay in the program after accepting the service. Approximately 80% of consumers who are currently utilizing overdraft protection have never given serious thought to discontinuing or opting out of the service. Almost 70% of them have expressed their preference that their bank offers overdraft protection as an option to their customers, whether or not a fee is involved, as opposed to only 13% who would rather their bank not offer overdraft protection at all. The ABA survey continues to show how policymakers seem to be out of touch with their constituents and what their true needs and wants are. Policymakers should ensure customers are given a full and fair opportunity to choose overdraft protection, and financial institutions should use it as an opportunity to help customers make better financial decisions in the future. Overdraft protection provides peace of mind, allowing consumers to make sound financial decisions without worrying about the consequences of overdrawing their accounts.

Strunk Response to January 2024 CFPB Proposed Changes to Overdraft Fees

February 28, 2024/in Banks, Compliance, Credit Unions, Financial Services, Markets, Overdraft Privilege, Perspectives/by Joel Lawrence

In mid-January of this year, the Consumer Financial Protection Bureau (CFPB) proposed a new rule to restrict overdraft fees charged by very large financial institutions (Those with assets over $10B). View the PDF of the Proposed Rule with Request for Comment here:

https://files.consumerfinance.gov/f/documents/cfpb_overdraft-credit-very-large-financial-institutions_proposed-rule_2024-01.pdf

When the Board of Governors of the Federal Reserve System first adopted Regulation Z in 1969, it excepted from Regulation Z’s definition of finance charge any charges for honoring checks that overdraw a checking account unless the payment of the check and imposition of the fee were previously agreed upon in writing. The Board subsequently made “minor editorial changes” to this exception, (e.g., to reflect “items that are similar to checks), such as negotiable orders of withdrawal. Under the new proposed rule, Regulation Z would generally apply to overdraft credit provided by very large institutions unless it is provided at or below costs and losses as a courtesy to consumers.

The proposed rule would accomplish this by updating two regulatory exceptions from the statutory definition of finance charge. First, the proposal would update an exception that currently provides that a charge for overdraft is not a finance charge if the financial institution has not previously agreed in writing to pay items that overdraw an account so that the exception would not apply to “above breakeven overdraft credit”. Second, the proposal would update a related exception that provides that a charge imposed in connection with an overdraft credit feature (e.g., a charge for each item that results in an overdraft) is not a finance charge if the charge does not exceed the charge for a similar transaction account without a credit feature (e.g., the charge for returning each item). The CFPB has provided two options to very large financial institutions to determine whether an overdraft charge is considered above breakeven overdraft credit. A financial institution may calculate its own “breakeven standard,” charging a fee required to cover losses and direct costs related to the provision of courtesy overdrafts; or a financial institution may use a “benchmark fee” of either $3, $6, $7, or $14, determined by the CFPB by analyzing charge-off losses and cost data.

The proposed rule represents a pivotal development in consumer finance regulation and would have a negative impact on the financial industry and consumers. Overdraft protection has been beneficial to millions of consumers since its inception. Research supports the fact that consumers who use overdraft protection, especially those who use it frequently, value the service. Even the Consumer Financial Protection Bureau’s (CFPB) research supports this fact. Furthermore, the CFPB has access to consumer complaint data in its own database, showing that complaints regarding overdraft protection and fees are extremely low. Strunk believes that a regulatory agency essentially setting limits on fees that can be charged by a financial institution sets a very dangerous precedent.

At present, the proposal pertains to financial institutions under the CFPB’s jurisdiction – those with assets over $10 billion. It is unclear what the impact will be on institutions with assets of $10B and below. However, if this proposal is enacted, the possibility exists that it will be adopted by other regulatory bodies. Also, regardless of additional regulatory action, all institutions may feel “competitive pressure” to follow the standard set by the very large financial institutions.

For now, no changes to existing overdraft programs should be made prior to knowing exactly how this process will play out. When discussing Overdraft Privilege and the current regulatory landscape, Strunk always emphasizes two things:

If you charge a sustained or continuous overdraft fee today, discontinue this practice immediately. Strunk has never endorsed that practice, and it is a flash point for regulators.
If you charge re-presentment OD fees, discontinue this practice as well and investigate the 24-month look-back restitution to consumers. This is an area where regulators have come out with clear guidance in the last 18 months and Strunk has previously issued recommendations to clients.

If your organization has questions regarding this matter or would like to schedule time to discuss, please contact us at support@strunkaccess.com or 800-728-3116.

Repayment Plan Management from Beginning to End

February 14, 2024/in Banks, Credit Unions, Financial Services, Markets, Overdraft Privilege, Perspectives, Tips/by Melissa Newbury

A Fresh Start Repayment Plan is a tool available to overdrawn customers that will allow them to repay the overdrawn balance in up to four payments and will also allow them to retain the use of their checking account. It also may help financial institutions recover and collect on accounts which may have otherwise charged off.

Included with Strunk’s hosted ODP Manager software, financial institutions have access to Strunk’s library of Fresh Start documentation. The library contains a Fresh Start Profile that addresses recommended features and optional considerations, a recommended Fresh Start Policy and Procedure Guidelines, a suggested Assessment template to determine Account holder’s ability to repay the Fresh Start Repayment Plan, and a recommended Fresh Start Agreement. These documents provide the necessary information to start offering and setting up Fresh Start Repayment Plans.

ODP Manager Formal Demand and Final Demand collection letters advise customers overdrawn for more than $100 to ask if a Fresh Start might be an option to repay the overdrawn balance in 4 payments or less. Once a customer contacts the institution, an assessment should be completed to confirm the customer’s ability to repay the Fresh Start Repayment Plan.

If a customer qualifies and accepts the Repayment Plan, ODP Manager users can enter a repayment schedule for each account. The repayment schedule can be used to generate the Fresh Start Agreement to be signed by the customer. It will also create payment reminders to show when a repayment should be due. The payment should be verified in the core system and then tracked in the repayment schedule once paid. If the account defaults on the repayment plan, the Fresh Start Default Letter can be generated in ODP Manager to inform the customer that the account has been closed, charged off, and reported to the appropriate agencies.

ODP Manager offers two reports related to Repayment Plans. The Fresh Start Tracking Report lists all accounts that have been identified as being in repayment by an ODP Status Code. A Repayment Schedules summary report can also be used to track the status of Fresh Starts, including payments made and outstanding balances. Both report options can be exported to PDF or Excel.

If you have any questions about Fresh Start Repayment Plan options in hosted ODP Manager, please contact Strunk Support at support@strunkaccess.com to find out more.

Options to Customize Letter Templates

January 17, 2024/in Banks, Compliance, Credit Unions, Financial Services, Markets, Overdraft Privilege, Perspectives/by Melissa Newbury

Strunk’s hosted ODP Manager software includes a suite of standard, recommended, and compliant letter templates. These templates are set up so users can easily generate the letters due each day. Even though Strunk provides the recommended letter content, the ODP Manager software allows the letter appearance to be customized to match other letters sent by an institution.

The letter headers and footers can include logos or text so that letters can be printed on letterhead instead of plain paper.

Letters can be signed by the user that generated the letter or if requested, they can be signed by a specific person, department, or the institution name. If signature images are provided, they can be added so that they show when the letter is generated.

If an institution would prefer to have a letter display a branch contact’s name or the phone number of the branch, the contact information can be updated based on the branch assigned to the individual account. This allows the letters the flexibility to direct users to contact a central location or their local branch to discuss the Overdraft Privilege program.

These options allow financial institutions to feel confident in generating ODP program letters that not only are compliant, but also represent an institution’s desired letter appearance.

If you have any questions about customizing letter templates in hosted ODP Manager, please contact Strunk Support at support@strunkaccess.com to find out more.

Flexible Fields in ODP Manager

December 13, 2023/in Banks, Credit Unions, Financial Services, Markets, Overdraft Privilege, Perspectives/by Melissa Newbury

ODP Manager has a standard list of requested fields that are used in the recommended ODP Manager letter templates and reports. These fields are included in the extract file created by an institution’s core or report writer and are updated when the file is imported daily into ODP Manager.

ODP Manager mappings are customizable and can also allow additional institution-specific data fields to be imported. These fields will be marked as flexible fields and will be labeled with an institution-specific label in ODP Manager. Once the fields have been mapped and imported into the hosted ODP Manager software, letter criteria can be adjusted to use the additional data field values. Report groups can also be updated to use the newly available data fields as well.

This flexibility allows institutions additional opportunities to customize ODP Manager to make ODP Program management in the hosted software more efficient or informative. If you have any questions about adding Flexible Fields in hosted ODP Manager, please contact Strunk Support at support@strunkaccess.com to find out more.

Consumers Continue Wanting Access to ODP

October 18, 2023/in Banks, Credit Unions, Financial Services, Markets, Overdraft Privilege, Perspectives/by Joel Lawrence

Consumers desire Overdraft Privilege as a financial product due to the wide array of choices available to them. In a Morning Consult survey, it was found that 9 out of 10 consumers consider their bank’s overdraft privilege valuable. So, what makes this product so valuable to consumers?

Consumer’s payment will clear instead of being returned, which can be less expensive. Sometimes consumers make mistakes when paying bills and accidentally overdraw their account. Because the consumer has overdraft privilege, the bills are paid instead of returned and it prevents late fees, NSF fees, and re-presentment fees. Overdraft privilege provides relief to consumers by ensuring their bills are paid, even if they miscalculated their bank account balance or forgot about a pending payment that hasn’t cleared yet. This feature significantly reduces their worries and potential financial stress.
Consumers will have funds available if they need them. Although it is generally not advisable, there may be situations where overdrawing your bank account is necessary. For example, let’s say it’s the weekend and the banks are closed, and you have an emergency that requires a visit to the hospital. However, the emergency room won’t provide treatment until you pay a $100 co-payment. Unfortunately, you only have $10 in your checking account. Fortunately, you have overdraft privilege, which means you can make the payment even if it incurs a fee.
Not being embarrassed because of returned payments. When you use overdraft privilege, the recipient of your payment won’t know that your bank account has insufficient funds. Instead, they will see that your payment has been credited as expected.

Despite Congress trying to modify overdraft services, we recognize the importance and necessity for consumers to have access to such programs. Overdraft services provide a significant source of liquidity for many Americans. By having access to overdraft privileges, consumers can be assured that they can make timely payments for their rent or utility bills, thus preventing any late fees, utility shut-offs, or even eviction

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

September 20, 2023/in Banks, Compliance, Credit Unions, Financial Services, Markets, Overdraft Privilege, Perspectives, Tips/by Melissa Newbury

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.

Viewing and Exporting Summary Information in ODP Manager

August 16, 2023/in Banks, Compliance, Credit Unions, Financial Services, Markets, Overdraft Privilege, Perspectives/by Kristi Daly

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 25^th, 50^th, and 75^TH 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

August 9, 2023/in Banks, Compliance, Credit Unions, Financial Services, Markets, Overdraft Privilege, Perspectives/by Joel Lawrence

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.