Bill Strunk, Chairman of Strunk & Associates, LP, was a featured speaker at the SEG & Business Development Conference held recently in Orlando. Strunk & Associates, LP, is a leader in implementing overdraft privilege programs under the Strunk & Associates' Overdraft PrivilegeSM Service Program for credit unions across the United States. In total, they have deployed ODP in over 800 financial institutions in 42 states and Puerto Rico. Overdraft Privilege is their core business. The following article is a recap of Bill Strunk's presentation on the value of Overdraft Privilege to credit unions and their members.
Let's begin by defining Overdraft Privilege (ODP) and why it can be a good member service. An overdraft privilege program first of all is discretionary. And its fundamentals are simple. ODP is a refined process to formalize and better manage discretionary overdraft services. It is a significant extension and enhancement of what all banks and most credit unions have always done.
Why would a credit union offer Overdraft Privilege? For two reasons-First, because it results in better member service and increased member loyalty. And second, it provides significant non-interest income to your credit union. It is truly a win-win situation.
Does Overdraft Privilege require a different mind-set among credit union professionals? Yes it does. But let's separate myth from fact. First, it is a myth to suggest that all members who write NSFs are irresponsible, can't be trusted, and not credit worthy. The fact is, most members who may at times overdraw are credit worthy and represent the bulk of your membership.
Another common misconception is members that overdraw represent low balance accounts. In the over 800 financial institutions we serve, we've found the average collected balance is $1,272.00 per account.
What's more, ODP programs benefit members in a couple of ways. We all know the insufficient funds process. When a member writes an NSF to the retailer, the retailer presents the check to the credit union and a charge is incurred for non-sufficient funds. The credit union returns the check to the retailer where another charge may be assessed, then the retailer re-presents the check to the credit union where yet an additional charge may be incurred. By the end of the process, two or three separate charges may cost the member $50 to $100 and the member's name is often published on a bad-check list by the retailer adding humiliation to the financial penalties.
Under the Strunk & Associates' Overdraft PrivilegeSM Service Program, the member writes a check to the retailer for more than his or her current balance, that check is presented to the credit union, the credit union pays the check and assesses a one-time ODP fee.
A well-managed and responsible ODP program is a good member service. It changes the paradigm of NSF fees from punitive to privilege.
When considering a third party ODP vendor to deploy a program for your organization, remember that vendors are not all the same. Make sure they have the capability to train directors, management and staff on all aspects of ODP and the members who use it. They should provide guidance in helping you properly communicate, educate and disclose the elements of ODP to your members to eliminate confusion and create understanding.
Don't overlook deployment. Vendors need to have a hands-on staff that can work with your operations and technology personnel to streamline the daily overdraft process. Risk management is another important aspect. Credit unions should be provided guidance on effective collections processes with sample letters and fresh start procedures. Perhaps the most important element of implementing Overdraft Privilege is compliance. Credit unions need to stay abreast of federal and state regulations that affect them and the programs they offer. Although no vendor can guarantee their ODP program will be in total compliance, they and their staff should be knowledgeable on federal and state regulations and guidelines that affect the financial institutions they serve. At Strunk & Associates an ongoing and real investment in and commitment to compliance efforts is spearheaded by top
U.S. legal firms. We are proud to have the endorsement of a number of national and state banking associations. We also have met with and obtained written materials and opinions from such organizations as the FDIC, OCC and the Federal Reserve. No other vendor has a higher ongoing investment and commitment to compliance than Strunk & Associates.
For more information about our organization, check our web site at www.strunklp.com, email us at information
