Consumers and Regulators Demand Straightforward, Disclosed Financial Services, Not Gimmicks

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

As financial institutions continue to cope with ongoing economic challenges, efforts to improve revenue by increasing service fees or implementing products that are non-disclosed are proving to be very unpopular with regulators and consumers.

According to, as regulations have increased restrictions on overdraft and interchange fees, financial institutions are finding new ways to make up for lost revenue. In many cases, this had led to new or increased fees for checking accounts and other services.

Consumers seek to avoid additional fees

As a result, it is often necessary for account holders to wade through menus of service bundling or minimum balance requirements to avoid the additional fees. In today’s environment, more and more consumers are rejecting that strategy. A report by Capgemini found that when a consumer decides to switch his or her bank, fees are a deciding factor for 50 percent of survey participants.

In late July, the Consumer Financial Protection Bureau (CFPB) released a report detailing its consumer complaint database that provides insight into the number and type of complaints the agency has received in 2012. And while comments about mortgages and credit cards ranked as the highest concerns of the roughly 55,300 complaints received, 15 percent were focused on bank accounts and other services—including confusion about overdraft protection program terms and fees.

As regulations on consumer financial products become more stringent, non-disclosed overdraft programs with dynamic limits and practices that cause financial hardship for consumers will pose greater compliance risks for financial institutions. In fact, over the last few years, nearly all of the criticisms by regulators, legislators and consumer advocates – along with fines and legal action – have focused on undisclosed matrix-based programs and those that implement high-to-low transaction posting.

According to the CFPB report, “Consumers express frustration with the order in which companies process account withdrawals because the processing of larger transactions before smaller ones can lead to more overdraft fee charges.”

Disclosed programs offer clear benefits for credit unions and their members

While consumers realize that financial institutions must earn revenue to survive, they expect transparency and value in the products and services they use to maintain their finances.

A fully disclosed overdraft program with clearly defined rules regarding terms, overdraft limits, program processes and how a member may access the service establishes a straightforward approach of responsible use. When supported by easy-to-understand disclosures and counseling on appropriate usage, such programs provide informed account holders with a valuable resource to better manage their finances. And most importantly, no “gotcha” fees or surprises.

As it turns out, the secret to maintaining satisfied account holders is finding the balance between maintaining regulatory compliance and providing reasonably priced products and services that they want and need. When you accomplish that, toasters and other gimmicks are not necessary.


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. To learn more about how the Association’s partnership with JMFA can benefit your credit union, contact Sales and Marketing Associate Craig Reed: 206.340.4789,

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