Changes To Impact Back-Office Expenses

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BIRMINGHAM, Ala.-Credit unions considering pricing changes to their checking products in the wake of new Reg E rules and the CARD Act need to recognize other costs are likely to rise in the back-office.

Dennis Dollar, principal with Dollar Associates here, noted that compliance is going to be more demanding and that examinations will be challenging for credit unions not accustomed to related supervisory rigors.

"That having been said, I am finding that most credit unions are developing a solid 'opt in' strategy for their overdraft program and have adjusted quite well to the disclosure provisions of the CARD Act," he declared. "While many are utilizing third-party firms to make sure their compliance is in order, the majority of credit unions have made the decision that they cannot abandon overdraft privilege programs simply because the new regulations are going to be challenging."

One reason: members like overdraft privilege programs, and most credit unions are dependent upon the income they generate, Dollar argued. Therefore, CUs are "sucking it up" and getting into compliance, costly and time-consuming though it may be.

Dollar said most of his clients are reporting strong success in obtaining the signed "opt-in" forms, particularly from the members who utilize the service and see value in it.

"Since the new Reg E changes apply to debit and ATM transactions and not checks, it is quite possible that the impact might not be as negative as earlier feared if the overwhelming majority of members who utilize overdraft privilege programs elect to 'opt in' early," he said. "We are encouraging our clients to implement an effective, fully disclosed opt-in program as early as possible, with a special emphasis on making sure that those members who see value in overdraft privilege programs are aware of the need to opt in."

Overdraft privilege programs are too important to both members and credit unions for them to be abandoned simply because the workload and scrutiny have increased dramatically, Dollar continued. "'Press on with the programs' is our message, but make sure you do them right. Study the rules closely, hire a third party to guide you if you must, but don't give up a program that members appreciate and credit unions need from a revenue perspective."

There are very few win-win, fee-based products in the market today, and overdraft privilege is one of the few, he asserted. "I believe it will continue, even with the new environment under the Reg E changes."

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