Make Sure You Have the Facts About Reg E Before Discounting Its Impact

In a survey conducted by The Nielsen Company in March of this year, 2,013 respondents weighed in on the likelihood that they would opt in to an overdraft program. Of the consumers surveyed, 26 percent said they would opt in; 22 percent would not and a majority; 39 percent, were undecided. The top two reasons cited for the indecision? Respondents didn’t have enough information about Regulation E and they had no idea there was an option to opt-in.

Similarly, some financial institutions are choosing not to bother with an opt-in strategy because they don’t think they will be impacted by the restrictions imposed by Reg E’s ruling on paying overdrafts on ATM and one-time debit card transactions. Or, they have decided that they will just “take the hit” because they don’t believe it will have much of an effect on their bottom line.

Unfortunately, this strategy could lead to a loss of as much as 60 percent of NSF/OD income caused by force pay or pre-authorized debit transactions. Following are three common scenarios that demonstrate how the loss of force pay income can happen and create a negative impact on your credit union:




Your institution does not offer overdraft limits at the ATM/POS…so there is no risk for income loss.


If your debit card network rules require your institution to pay an authorized debit card transaction that overdraws a member’s account, your income will be impacted due to the loss of force pay income. 


The volume of that income loss can be as high as 60 percent of your NSF/OD income.




Your institution has online, real-time processing for handling ATM/POS transactions…so there is no risk for income loss.



Your institution has online, real-time processing and does not offer overdraft limits on ATM/POS channels…so there is no risk for income loss.

With the latest news of an additional $1 billion assessment by NCUA to shore up the corporate stabilization reserves along with pending legislation on interchange fees, it is more important than ever to make sure your credit union has alternative sources of non-interest income to remain viable. An overdraft privilege program can make a substantial impact to your bottom line and provide a valuable service to your members; which takes us back to the Nielsen survey.

The top reasons 26 percent of the respondents indicated that they would opt in to an overdraft program were:

  • to be covered in case of an emergency situation or unexpected expense;
  • they have multiple users on their card and don’t always know their balance; and
  • they want to avoid embarrassment at the check out.

While there is still much confusion in the marketplace about the implications of new regulations, you know that your members expect you to provide the services they need to maintain financial stability. And, you know that your credit union needs a strong bottom line to compete in the marketplace. A disclosed overdraft program can be a real benefit for both your members and your institution.

About JMFA
John M. Floyd & Associates (JMFA), a business partner of the Washington Credit union League, is a profitability and performance improvement consulting firm, serving more than 2,000 financial institutions in all 50 states. As a direct result of its programs, JMFA has helped thousands of clients dramatically improve their performance and their bottom line. All JMFA overdraft programs are guaranteed 100 percent compliant with federal and state regulations. They offer 100 percent core processor compatibility, are fully automated and easily implemented. To learn more about JMFA, please contact Emily Crandall, JMFA regional director, at or (888) 879-3136.


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