Disclosed Overdraft Program Can Contribute to Overall Non-Interest Income and Provide Member Peace of Mind

While the Federal Reserves’ final decision on the interchange fee cap—which is set for implementation on October 1—was more generous than the 12 cents proposed in December 2010, industry experts predict that the cap could still cost credit unions 40 percent of debit revenue. The newly approved 21 cent per transaction cap, plus an additional 0.5 percent for fraud-related costs, brings the total cap to as much as 26 cents. However, this is far less than the 44 cents currently earned per debit card transaction.

As the industry awaits the final impact of measures to create a two-tiered system that was included in the initial legislation to protect small institutions and consumers, concerns over revenue persist. And while overall economic forecasts continue to be somewhat optimistic, many financial institutions continue to deal with uncertainty regarding new regulations, as well as declining revenue.

If your credit union is experiencing a decline in consumer and commercial loan activity and loan quality remains weak, it may be time to take a look at other revenue options. But in doing so, make sure you factor in the needs of your members, as well as your institution. Resorting to increased fees or new charges for existing services may not give you the results you desire. Let’s face it, in many parts of the state consumers continue to deal with high unemployment and financial challenges of their own.

JMFA OVERDRAFT PRIVILEGE® program can increase your non-interest income from 50 to 300 percent and provide a valuable service to your members.

If you don’t offer an overdraft solution, consider this: these programs were originally created as the result of consumer interest in a product to protect their purchases should they face an emergency or make an error on their checking account. The key is to provide your members with a clearly defined program that guarantees full regulatory compliance, without the added expense of compliance personnel and resources. The result: your members have financial peace of mind and your credit union’s bottom line is positively impacted.

If you currently have an overdraft privilege program, but you’re not sure it meets all new regulatory requirements or is providing optimal revenue for your credit union, a JMFA ODP Compliance and Performance ReviewSM provides all the recommendations necessary to bring your program into compliance and help you take full advantage of all performance opportunities.

About JMFA

JMFA, a Preferred Business Partner of the Northwest Credit Union League, is a leading provider of profitability and performance-improvement consulting. For more than 30 years, JMFA has been recognized as one of the most trusted names in the industry, helping financial institutions enhance their bottom line with programs like JMFA Overdraft Privilege®. JMFA is also recognized for earnings enhancement and expense control programs, training, executive placement, account acquisition programs as well as product, service, pricing and technology-improvement consulting. Simply stated, JMFA’s programs and services are designed to increase income or reduce expenses. JMFA is proud to be a preferred provider among many industry groups. To learn more about JMFA, please contact Emily Crandall, JMFA Regional Director, at Emily.Crandall@JMFA.com or by phone at (888) 879-3136.

Posted in Compliance.