WILMINGTON, N.C.-Changes to Reg. E and future overdraft reform are beneficial for credit unions, according to Robert C. Giltner, a consulting partner at Velocity Solutions.
"CUs should embrace Regulation E, with great enthusiasm, as a better way to serve members by providing clarity. It should seen as a very positive step forward for the industry, consumers and merchants," he said.
As CU Journal previously reported (Solution Addresses One of 2010's Challenges: Reg E Compliance, Jan. 4), Velocity Solutions recently debuted a customizable software solution to manage the opt-in process, per the new Reg. E rules, while also boosting member service. Regulation E gives credit unions a chance to re-introduce members to overdraft protection, especially the most profitable users, and do so in a way that makes them truly appreciate the service.
"CUs should embrace this like they'd embrace a new product launch, not an operational requirement," said Giltner. "This is an opportunity to serve members better on an ongoing basis."
The regulatory changes also remove the ambiguity on how financial institutions should treat debit transactions when a member's account is overdrawn. With the new rules in place, credit unions can now use analytics to determine risk tolerances for each member, as opposed to using arbitrary, across-the-board requirements that established how much a member could overdraw. Giltner believes that those changes could allow the industry to pay as many as 95% of overdrafts, much higher than the 80% seen today, without taking on additional risk.
