True Impact Of Reg E Won't Be Seen Until After Aug. 15 Deadline

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MINNEAPOLIS-As credit unions and banks prepared for the twin deadlines of Regulation E the consensus is: there is no consensus.

Lisa Fraga, VP of banking for Wolters Kluwer, noted there is a "multitude of changes" taking place across the country with overdraft protection programs being treated every which way.

"Some banks and credit unions are running Reg E opt-in programs, some never had overdraft policies in the first place and still others have decided it is too laborious and will give up the income," she assessed.

The smaller the institution, obviously the smaller the base they have, and obtaining consumer opt-in for overdraft requires a very aggressive effort, Fraga continued. She said direct mail might not get much of a response rate, so some credit unions are using up to three mailings, some are using the e-mail channel, some are making phone calls.

"Because direct mail has such a small response rate, I don't think any financial institution should rely solely on direct mail," she advised. "Credit unions tend to have a higher percentage of e-mail addresses of their members compared to banks, which helps them."

Wolters Kluwer is getting mixed feedback from financial institutions regarding how consumers view overdraft protection as a product option. Fraga said many consumers view it as they do insurance: something they hope to never use but it is nice to have.

"The industry prediction was 40% or as much as 70% of fee income lost, which is a really wide range," she said. "It is too soon to tell what the correct figure is. Early indications show some results, but it is hard to know. Aggressiveness in reaching the member and customer base is what is going to determine success. There is an educational component involved-letting people know overdraft protection exists."

Consumers do not want to hear about the technical aspects of the regulation, they only want to know how it impacts them, she added.

According to Fraga, the impact of what Reg E really means to CUs and banks will not be seen until after the later of the two deadlines, Aug. 15.

"Some financial institutions may realize at that time they should initiate some sort of program. Until someone gets charged with an overdraft fee or gets declined at the point of sale, you don't know how they will respond."

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