Follow the Bouncing Check
2003; American Bankers Association; Volume: 95; Issue: 4 Linguagem: Inglês
ISSN
0194-5947
Autores Tópico(s)Banking stability, regulation, efficiency
ResumoQ. Is fee-based overdraft protection: a. A valuable customer service? b. A consumer rip-off? c. Vitamins for your bottom line? d. All of the above? Many banks provide free checking accounts for employees, and some traditionally kept a tight rein on them. At the erstwhile Texas Commerce, for instance, there was a strikes policy for employees who bounced checks. The first time an employee bounced, a former employee says, it meant a trip to the Personnel Department. The second time an employee bounced, it meant a trip to Personnel for both the employee and his boss. Finally, the third time around, the supervisor was supposed to escort the employee out the door. After all, the thinking went, responsible bankers are not supposed to be bouncing checks, which, aside from indicating personal mismanagement, is, in some jurisdictions, a crime. It hasn't been unusual for banks to consider check bouncing the financial equivalent of cause for excommunication. More than one has maintained a bounces and close the account rule for customers. Stories like this draw a rebuke from consultant Bill Strunk, president of Strunk Associates, L.P., www.strunklp.com. He declares that bankers aren't supposed to be preachers--judging their customers as if they were lost sheep who needed guidance--but simply providers of services, bringing those customers what they happen to need. Bankers have a cultural mindset that all people who overdraft are winos and derelicts, Strunk says. are taught and trained that NSFs are bad people. But I've discovered that NSFs are good, hardworking people who need a little wiggle room, or who need a hand when their car generators die on Friday and they're not getting paid until Monday. This isn't about fee income, Strunk adds. about customer service. Bouncing up, up, up Fee-based overdraft programs, such as those promoted by Strunk's firm, have been burgeoning in popularity among bankers, especially community bankers, for several years. It is rare to attend any meeting of community bankers where an overdraft program isn't mentioned as a profit-building idea. Not the lines of credit attached to checking accounts, but the programs that permit customers to overdraft for a fee. While many consultants have joined the fray, three besides Strunk's firm dominate the mix: John M. Floyd & Associates, www.johnmfloydandassoc.com, and Pinnacle Financial Strategies, www.pinnaclefinancialstrategies.com, both in Houston, as is Strunk's firm; and Alex Sheshunoff Management Services, L.P., www.ashesh.com, Austin, Texas, whose overdraft program is endorsed, as part of a suite of consulting services, by ABA. Generally, these programs allow customers to overdraw up to a certain dollar amount and pay a fee, rather than interest, each time they do so, up until the limit. They are also generally required to bring their balance back up within a short period. The ads for some companies' overdraft products promise results that would make banker's mouth water. And, in the latest edition of the ABA/ABA BJ Community Bank Competitiveness Survey, 43.4% of the sample offered fee-based overdraft plans, with 70.6% of those banks stating that the programs were significant contributors to revenue. If profitability were the only issue, where's the problem? It's hardly a sin. However, horror stories about overdraft plans have appeared in prominent publications and on noted television programs. And even before that, the Federal Reserve Board began asking if fee-based overdraft plans (which it referred to as bounce protection, a term that Pinnacle's Gillen says his firm has rights to) ought to be pulled under Regulation Z (Truth in Lending Act) as a form of credit plan. In March the Fed's Consumer Advisory Council was scheduled to evaluate the issue, and the more than 200 comment letters filed about it. …
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