WILMINGTON, N.C.-With fewer than 90 days remaining to comply with a new law, indications are credit unions could soon be scrambling to meet members' overdraft needs this fall.
Industry analysts told Credit Union Journal that members are not sending back opt-in consent forms to comply with Reg. E, and many CUs are bracing for what may be a flood of calls in late August and September when transactions are declined.
Under the new changes to the Fed's Reg. E, Electronic Funds Transfers Act, by July 1 credit unions and banks must obtain permission, or opt-in, from new members and customers to provide them with automatic overdraft protection on all non-recurring debit card transactions and ATM withdrawals. By Aug. 15, they must obtain opt-in for all their existing members/customers.
Getting Ahead of the Curve
"It is still early," said Heather Kline, credit union product specialist at Velocity Solutions. "I have talked to a bunch of credit unions that are getting out ahead of the curve. They have sent initial letters asking members to send back opt-in forms, and they are not getting many of those forms back."
Velocity consulting partner Bob Giltner is not surprised, saying that "70% of people don't even open their bank statements." According to Giltner's experience, 60% to 70% of CUs are only planning educational efforts around Reg. E, and not new policies or products.
That supports an assertion by consultant Mike Moebs that many credit unions are missing the point with Reg. E. "There is a marketing component to all this," said the Moebs $ervices economist and CEO, pointing to a significant opportunity to boost overdraft revenue in the next year.
"The marketing component of this is extremely important, and what I see is that there are so many credit unions missing this. They are only seeing Reg. E as compliance. But this is a marketing, member service, pricing, and IT issue."
Moebs pointed out that 57% of financials are raising overdraft pricing, which will not drive consent and revenue, and will also contribute to problems on Aug. 15-a Sunday when the new rules kick in, and when many are likely to have shortfalls in their checking accounts due to end-of-week paychecks not being credited by that date, Moebs warned (Credit Union Journal, March 25).
Some credit unions are gearing up to handle the August member service issue, according to Giltner, marrying core systems and debit card files to respond immediately the next time a member's debit purchase is declined. "If a member has opted out and a debit transaction is declined, that will trigger a notice to the member that reminds them that they can opt in to overdraft protection."
But many appear to be simply relying on letters and e-mails to get the message out before Aug. 15, and then follow-up phone calls when members fail to respond or run into trouble, according to the St. Petersburg, Fla.-based PSCU Financial Services, which recently instituted "CU Initiative," a series of member contact services to educate members on the new overdraft rules (Credit Union Journal, March 30). The package includes a customized automated outbound call, a toll-free number to an IVR to authorize opt-in, a live call from PSCU's call center, and a Q&A line.
"Credit unions can pick and choose," said Sheila Fenton, TMC, director of sales for PSCU. "Most credit unions are looking at the whole package, but are going first with the digital (phone) messaging and then the IVR. Toward the end, for non-responders, is when they may consider the physical outbound call."
In Raleigh, N.C., State Employees CU is seeking to change members' habits now with its new Cash Points Global Card. The card is tied to a non-interest bearing, controlled spending account with electronic-only access through the CPG card.
No Checks, No Statements, No Fees
There are no checks and no paper statements, and since all transactions are limited to the available funds in the account, no overdraft or NSF fees are incurred, explained Leanne Phelps, SVP-card and record services. "If funds are not available in the CPG account, the transaction is declined. We want to make it black and white for members with this account-they either have the funds or they do not."
The card was released in March, and in the first two weeks the $19.5-billion SECU has opened 475 accounts with balances totaling $66,500, an average of $140 per account. CPG charges a $1.00 per month fee (which is automatically routed to the credit union's non-profit SECU Foundation), can be used anywhere the Visa logo is displayed. Access also is allowed at any of the credit union's 1,100 ATMs.