A two-week system tweak-and "extensive homework"-is what it took for San Diego Metropolitan Credit Union (SDMCU) to extend overdraft privileges to members, according to Gloria Liberti, vice president of operations.
That way, Metropolitan spurned offers made by more expensive overdraft privilege technology vendors, reinventing its existing collections system in April.
"We looked at different vendors, and most charge for overdraft privilege systems based on the percentage of increased fee income during a two- to five- year contract," Liberti explained.
The $285-million CU wanted to figure out how to avoid those charges. "We knew that our collections system worked exactly how we wanted it to work on the collections side," Liberti said. "We wanted to find out if there was a way to modify the system so that it looks at shares."
The answer came from Irving, Texas-based TriSyn Group, which provides the Intellect collections system to SDMCU. TriSyn configured the system with fields that track negative share accounts.
"For example, instead of a 'last payment' field, there's a field that shows the date that the member went negative," Liberti said. The collections system now identifies the overdraft checking product and automatically pays any NSFs.
Tweaking Intellect took care of the technological aspects, but there were other considerations, according to Liberti. "We had to think about the legal aspects, member notifications, and whether the program fell into the Truth in Lending Act (Regulation) Z)."
Certainly, it's easier to leave all that up to a third party, but "if credit unions have the resources to investigate the legalities, it would behoove them to check into developing their own program," she said.
"Automating the overdraft privilege program has improved member service and productivity," Liberti continued.
Intellect tracks negative share accounts and places each account into a queue based on an incremental number of days that the account is overdrawn. SDMCU sends out a mass notice from each of five delinquency queues and for each account before the account is handed over after 30 days to the collections department.
"The bottom line is member service," Liberti said. "We wanted to offer a better form of service by paying members' checks. This way, the member is only getting charged our normal $25 NSF fee, instead of also getting a charge from the retailer. Our members gladly pay the fee, with the peace of mind knowing that we didn't return the check to the retailer."
The program seems to enable members to keep a cleaner slate. Since April, the 29,000-member CU has seen less than $1,000 worth of loss, said Liberti.
That's nothing, considering that "the fee income generated by this member service far outweighs the loss," she said.
"And 95% of the accounts are cured before the 30th day," she added.
San Diego Metropolitan CU is careful not to let members drown in NSF fees and financial irresponsibility, Liberti said. Members are removed from the program based on parameters such as their total number of NSFs; the amount of NSF fees the member has paid; the amount of time before the member cures the account; and the number of times the member has been in each queue.
Although the Intellect negative shares account tracking feature was custom- developed for SDMCU, the same capability is now available to new Intellect clients.