Overdraft Protection:

Transcription

1 Overdraft Protection: Does Your System Match Disclosures? Karla Alexander-White, CRCM, Compliance Manager-Corporate Compliance Jason Spelliscy, CRCM, Regional Director, RISC Solutions Thursday, April 13, 2017

2 Good Morning! 2

3 Compliance vs IT IT vs Compliance 3

4 What are We Going to Discuss? 1 OVERDRAFT PROGRAM 5 REGULATORY ENFORCEMENT 2 REGULATORY EXPECTATIONS 6 PROACTIVE MANAGEMENT 3 CURRENT HOT TOPICS 7 QUESTIONS AND ANSWERS 4 SYSTEM CONFIGURATION 4

5 Overdraft Program Common Overdraft Solutions 1 2 AUTOMATED TRANSFER AD PROGRAMS CAPABILITIES Will discuss further Line of Credit, Credit Card, Linked Deposit Accounts 3 HOC DE Review Overdrawn Items (Typically Checks) Next Business Day Pay/No-Pay Decision is Judgmental 4 DEBIT CARD ACTIVITY Opt-in Functionality Preauthorized Transactions and Amounts 5 MINIMIS Small Overdraft without a Fee Charged Consistent Process Challenges 5

6 Overdraft Program Common Elements of an Automated Program Core vs Third-Party Limit Dynamic or Static Customer Scoring All Transaction Types (excluding debit cards) All Transaction Types with Debit Cards Loss Mitigation/Collection Efforts Ad Hoc 6

7 Overdraft Program Overdraft Fee Non-Sufficient Fund (NSF) Fee Continuous Overdraft Fee Transfer Fees Daily Cap (Number of Items per Day or Dollar Amount per Day) Daily Cap (Number of Items per Day or Dollar Amount per Day) Timeframe for Assessing Assessed After 5 Days (Business or Calendar) Overdrawn Linked Deposit Account Linked Credit Account Disclosures vs. System Parameters? 7

8 Regulatory Expectations Rules, Regulations, Guidance Electronic Funds Transfer Regulation E Debit Card Opt-In Truth in Savings Regulation DD Disclosures Change in Terms Funds Availability Regulation CC Holds on Deposits Dodd-Frank Act UDAAP Federal Trade Commission Act, Section 5 UDAP FFIEC 2005 Guidance CFPB Winter Highlights Winter 2015 CFPB Study of Overdraft Programs June 2013 OCC Bulletins Opt-In Requirements and Related Marketing Issues Third-Party Relationships: Risk Management Guidance FDIC Only: 2010 Overdraft Payment Supervisory Guidance (FIL ) 8

9 If the consumer does not opt in, banks may either allow or decline the transaction, but cannot charge a fee if they decide to cover any overage. ~ Regulation E 9

10 Current Hot Topics Balance Definitions Available Balance Ledger Balance Fee-on-Fee Concerns Overdraft Fee due to Other Account Fee Business Day vs. Calendar Day Continuous Overdraft Fee Preauthorized Debit Card Transactions Opt-In How the Transaction Affects Balance Methodology Disclosures Clear-and- Conspicuous Expectation Content = System Setup Parameters 10

11 Current Hot Topics Unfair Practice Assessing an overdraft fee based on the Available Balance at the time a transaction is posted when there were sufficient funds in the Available Balance to cover the transaction when it was authorized. Source: Outlook Live Webinar November 9,

12 Current Hot Topics Posting using Available Balance Description Amount Available Balance Ledger Balance Day 1 Opening Balance $100 $100 Signature Debit Authorized <$80> $20 $100 Day 2 Check Posted <$40> <$20> $60 Overdraft Fee <$30> <$50> $30 Day 3 Signature Debit Posted <$80> <$50> <$50> Overdraft Fee <$30> <$80> <$80> Source: Outlook Live Webinar November 9,

13 Technology/System Elements System Configuration 13

14 System Configuration Order of Presentment Source of Funds System Parameters Continuous Overdraft Fee Calendar vs. Business Days Available vs. Ledger vs. Disclosures? 14

15 System Configuration Order of Presentment Source: CFPB 15

16 System Configuration Automated Overdraft Processing Overdraft Limit Static Same Limit Unique Limit Monitoring and Loss Mitigation Dynamic Scoring Monitoring & Customized Loss Mitigation 16

17 Regulatory Enforcement 17

18 We will not hesitate to take action against any entity that we find to be deceiving or abusing consumers. ~ Richard Cordray 18

19 Regulatory Enforcement Consumer Financial Protection Bureau WHEN WHAT PENALTY FIXES July 2016 Telemarketing Vendor Deceptive Marketing Consent Order Fine - $10 Million Fine Third-Party Risk Management Monitoring, Testing, Audit Enrolled in Service without Customer Consent 19

20 Regulatory Enforcement (cont.) Consumer Financial Protection Bureau WHEN WHAT PENALTY FIXES August 2015 Overdraft Fees Consent Order Fine - $7.5 Million Fine Policy & Procedures Training Customer did not opt-in Monitoring Audit 20

21 Regulatory Enforcement (cont.) Consumer Financial Protection Bureau WHEN WHAT PENALTY FIXES January 2017 One-Time Debit Card Transactions Absence of Consent >65% Opt-In Rate Sales Incentives Lawsuit Seeking Redress Injunctive Relief Penalties Tone at the Top Policy & Procedures Training Monitoring Audit 21

22 Proactive Management Function/Framework Due Diligence New Product/Service On-Boarding Change in Terms System Release Updates New Technology New Product Development Core Available Settings Committee Which lines of business are represented? Ownership & Accountability How is it defined? Regulatory Environment Presentations, Alerts, Enforcement Actions Testing/Validation/Confirmation System Configuration Third-Party Vendor Management 22

23 New Technology Group Discussion 01 New Technology Text/SMS in realtime Opt-in 02 Regulations to Consider Reg E, UDAAP/FTC Section 5, OD Guidance Documents 03 Timing of Disclosures? 04 What is Disclosed? 05 What is the Customer enrolled in? Cost Most or Least Expensive Are there Lower Cost Alternatives 06 Is it Coercive? d Avoid Embarrassment? 23

24 Quick Recap Overdraft Programs/Sources of Funds Fee Structure Balance Methodology Considerations In Summary: System Parameters and Settings Ownership and Accountability Proactive Management Enforcement Actions 24

25 Visit us at kiosk 300B-D to learn more Thank You Karla Alexander-White Jason Spelliscy