The Days of Matrix Overdraft Programs Are Over

By John M. Floyd, Chairman and CEO of John M. Floyd & Associates

As regulators continue to fine-tune their expectations of consumer financial products, they seem unified in their efforts to require transparency regarding fees and information about how financial programs work. And while the credit union industry has always been carefully regulated, there is little doubt that the renewed focus on compliance related to overdraft programs could lead to confusion for institutions without compliance expertise.

Ultimately, there are two kinds of overdraft solutions: undisclosed matrix programs or transparent, fully-communicated programs. Matrix overdraft programs, which were developed to replace the time-consuming, manual task of determining which insufficient-fund checks should be paid, are used by many of the largest financial institutions in the country. These programs use a complicated criteria-based matrix to decide on a daily basis whether or not to pay overdrafts on consumer accounts.

Additionally, matrix-based programs increase compliance concerns because they are non-disclosed products. Since the criteria used to determine which checks to pay are always changing, it is impossible to explain how the programs work. So, an account holder has no idea if an overdraft will be paid or what his or her overdraft limit might be. And in today’s regulatory environment, that spells trouble for the institution. It is important to note that all of the recent criticism by regulators, legislators and consumer advocates has been focused on matrix programs—because they are secretive and unexplainable.

On the other hand, JMFA Overdraft Privilege® is a fully-transparent overdraft program with simple overdraft limits that are fully communicated to account holders. With a 100 percent compliance guarantee, JMFA Overdraft Privilege® gives credit unions complete regulatory peace of mind and provides financial stability for members.

In today’s regulatory environment, transparency is key

Regulators demand clear, simple disclosure about how things work with checking accounts. To protect your credit union from criticism by consumer groups and give yourself an advantage with regulators, make sure your overdraft program is easy for members to understand. In today’s economy, consumers want to know that their purchases will be covered. And while the majority will never knowingly overdraw their account, they appreciate the security of knowing their financial institution “has their back” if for some reason they don’t have sufficient funds.

Plus, consumers are more inclined to use a program like overdraft privilege—and accept a reasonable fee—when they understand its value and know how it works. As a result, more members will sign up for a fully-disclosed program, which will increase your revenue possibilities.

About JMFA

JMFA 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 call 800.809.2307, or visit our website at


Strategic Link is the NWCUA’s wholly-owned service corporation, providing the Association’s member credit unions with exclusive high-quality, competitively-priced products and discounted services. Questions? Contact Sales & Marketing Associate Craig Reed: 206.340.4789,

Posted in Compliance News.