The following table was written in April of 2001 as a brief overview of No-Bounce and its compliance with state and federal regulation. It’s interesting to look at it today, in light of the final guidance issued by the joint agencies on February 18, 2005.
Each component of No-Bounce has been designed to provide significant benefits to consumers and the institutions and to function in full compliance with state and federal regulations.
The many banks, credit unions and savings institutions who employ No-Bounce already comply with the mandates and best practices defined in the Feb. 18, 2005 final guidance. Moebs has always guaranteed 100% compliance and always will.
Participation Criteria
Adheres to Privacy Act, Patriot Act and NCUA Rule 12 CFR part 701.
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Debit Scoring™—empirical, non-discriminatory process, allows more qualified check-writing consumers to participate and minimizes collection risk.
More of the right consumers are qualified to participate, which means more revenue and less collection costs for the institution.
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Limits
Adheres to Reg. Z – violations of discriminatory Pricing. Adheres to Reg B and Reg. O.
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Debit Scoring™ establishes meaningful limits (in comparison to other programs’ set amounts, typically they are $100 - $500) based on market criteria.
Provides maximum revenue while covering payments that are most important to consumers when they make a mistake with their account balance. Protects consumers' credit standing.
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Pricing
Interpretive Letter #914 and Reg. Z is not considered a finance charge.
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Market-oriented pricing strategies--lower pricing and in parity with NSF fees. Greater volume coupled with low No-Bounce operational costs mean lower service fees generate greater net income.
Consumers perceive fees to be a solid value.
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Communication
Adheres to FTC Act, avoids being interpreted as deceptive to consumers.
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No “payday” loan-type enticements. Full explanation of checking account management and overdraft options contained in policy materials and program newsletter.
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Implementation
Adheres to OCC Letter #914. Adheres to Reg. Z. Adheres to Reg. DD.
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Members may choose to opt out at any time. Customer-service issues are handled quickly and to consumers’ satisfaction.
No-Bounce utilizes institution’s existing IT system, no add-ons required.
Disclosures, policy material, and comprehensive training provided for implementation, launch and ongoing management.
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Collections
Adheres to NCUA Rule 12 CFR part 701. Collections follow Fair Debt Collection Practices Act.
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An overdraft is a mistake and communicated as such to members. Repayment required within 24 – 72 hours.
Collections minimized because of up front Debit Scoring. Losses are 1 – 3% of fee revenue – compare to 15% and more with other approaches.
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The February 18, 2005 final guidance includes the following information in specifically referencing state and federal regulations.
The institution must follow state and federal laws and regulations.
- State laws can include criminal laws and unfair and deceptive acts or practices.
- Legal counsel should review any program
- On going monitoring is required
FTC Act/Advertising Rules
- Prohibition of unfair and deceptive practices
- Overdraft programs can easily fall under this rule
- Institutions should closely review materials that inform the consumer about the program
TIL/Reg Z
- OD fees are not considered finance charges so they are not disclosable under Reg Z
- Prices for ODs and NSFs are the same
- Overdraft repayment loans are disclosable
Equal Credit Opportunity Act
- ECOA prohibitions against discrimination
- Reference is made to the protected 9 classes.
- Adverse action provisions of ECOA need not be followed because overdrafts are incidental credit.
Truth in Savings
- Fee disclosures required
- Inaccurate or misleading ads are prohibited
- Regulations will be updated for OD services
Electronic Funds Transfer Act
- EFTA allows ODs on debit cards and ATMs
- ATM receipts must indicate account is overdrawn
- Statements must indicate balance, debit and fees charged
