'Funny Sunday' Is Deadline For Opt-In On Overdrafts
WASHINGTON-Credit unions and banks are preparing for an unusual phenomenon-the middle of the month payday on Sunday, Aug. 15, when millions of consumers may learn the hard way they were supposed to have "opted-in" to overdraft protection on their debit card accounts.
"Because of that, it's going to be a free-for-all," said Michael Moebs, who provides overdraft and other consulting services to 2,000 institutions. "You're going to have people whose accounts are not credited that weekend and they will not have overdraft protection."
Under the new changes to Reg E to be implemented July 1, new members/customers must be invited to opt in to overdraft protection programs on all non-recurring debit card transactions and ATM withdrawals. By Aug. 15, they must obtain opt-in for all their existing members/customers.
Because the majority of wage-earners get paid in the middle of the month, that means their accounts will not be credited with their pay until the following Monday, according to Moebs. "We've been talking with the Fed about this, asking them to move this up to the Monday," he said. "You're going to get people standing in line for groceries that weekend and they're going to get declined. It's going to be a nightmare."
So far, the Fed is sticking to the original deadline of Sunday.
Moebs said data on 1,100 CUs and 900 banks shows fees from overdraft protection services fell significantly in the fourth quarter, based on the cutbacks at several large banks and the residual effects on smaller institutions. He projects further declines in revenues from overdraft services-as much as $600 million for credit unions in the second half of this year-but he is confident those fees will return once consumers realize the need to opt-in.
He predicted almost every consumer who currently uses overdraft protection on a regular basis eventually will opt-in, and eventually will lead to more overdraft fee income than ever before.
NCUA Eyes Growing Corporate Losses
ALEXANDRIA, Va.-Growing mortgage foreclosures and unemployment has NCUA expecting losses at corporate credit unions to be higher than the $6 billion originally projected. "The losses are coming in greater than projected," said Melinda Love, chief examiner for NCUA.
Fourth quarter losses for investments held by all of the corporates came in slightly higher than NCUA had projected based on data provided by PIMCO, $307 million, compared to $302 million. But senior NCUA executives expect the bonds held by the corporates, mostly mortgage-backed securities, to continue to deteriorate as mortgage foreclosures continue to rise and unemployment remains at high levels, said Love. What she called the "shadow foreclosure market" is expected to continue to weigh on such securities, she said. "It's not likely that the losses are going to come in less than what is projected now," she told Credit Union Journal.
The NCUA chief examiner declined to give an updated loss estimate on the corporate losses, saying the figures have not yet been shared with the NCUA Board. But several independent observers have projected losses on the corporates to be as high as $10 billion.
For a more in-depth look at this story, go to www.cujournal.com.
Ex-Mngr Wins Unemployment Benes
ST. PAUL, Minn.-In a ruling short on remuneration but long on potential impact, a state appeals court this week ordered the Minnesota Department of Employment and Economic Development to pay a former branch manager at Greater Minnesota CU $10,000 in back unemployment benefits even though she was fired for her role in causing the credit union as much as $550,000 in losses.
The case is of broad interest despite its small monetary award because it raises the issue of entitlements in firings, according to Howard Bolter, a local attorney who represented the ex-manager, DiAnne Bean, in the case. "Under Minnesota law you are entitled to unemployment benefits unless you do something egregious to deserve being fired, like engaging in gross negligence or if you tell the boss to go 'F' himself. Then, you are not entitled to unemployment benefits," Bolter said.
For a more in-depth look at this story, go to www.cujournal.com.
Ringleader Sought In Fla. ATM Fraud
ORLANDO, Fla.-More than 40 people were charged in an elaborate fraud and ID theft ring that drained as much as $250,000 from five area CUs over the last three years, but investigators still are looking for the woman they believe is behind the operation.
The Florida Department of Law Enforcement said it has arrested 21 people in connection with the case. But 21 others, including the alleged ringleader, Vanessa Rideau, remain at large.
Rideau allegedly paid the other individuals to open accounts at numerous CUs and then use their ATM cards to deposit fictitious checks and withdraw cash before the status of the checks were detected.
