Profit Technologies Corp. seems to have taken to heart the old adage of keeping your friends close and your enemies closer.
The Davidson, N.C., company wants the Center for Responsible Lending to endorse its check overdraft software, despite a report by the consumer advocacy organization excoriating such products as deceptive loans designed to increase banks' bottom line at the expense of unwitting consumers.
Cliff McKee, a managing director of Profit Technologies, said its product helps banks extend overdraft credit to their customers in a responsible way that even the Center for Responsible Lending could like. He also hopes the group's approval will give Profit Technologies an edge over its competitors.
"Because of their voice in the marketplace, they get a lot of calls asking them what programs are safe," Mr. McKee said. "We would hope we have enough confidence from CRL that they would refer us" to banks seeking good overdraft programs.
Profit Technologies officials had an initial meeting with the advocacy organization in April to introduce their company and its software - which, like that of other providers, automates the process of flagging returned checks and covering overdrafts. In May the officials demonstrated its software to the organization, and they have a follow-up meeting scheduled Oct. 17 to answer additional questions.
The outreach is unusual because consumer groups have taken a dim view of overdraft products. They have claimed that banks manipulate accounts by clearing the largest checks first, increasing the likelihood of accounts lacking sufficient funds when checks are to be cleared.
In this way, they say, banks can charge a fee on smaller checks, usually in the range of $25 to $30. Advocates say this results in fees falling more often on low-income people living paycheck to paycheck - people who can least afford the fees.
Profit Technologies has already earned the endorsement of the Independent Community Bankers of America. The association lists the company as a preferred service provider for overdraft and revenue-enhancing products, said Daniel P. Clancy, a vice president at ICBA Services.
Mr. Clancy said many banks already cover customer overdrafts as a courtesy. He said his group's members have told him customers appreciate banks for keeping them from incurring merchant overdraft fees and from getting a reputation for check bouncing.
Profit Technologies was chosen as a preferred provider because it takes a risk-management approach to letting consumers overdraw accounts and advises against offering overdraft lines to all customers on a blanket basis, he said.
The Center for Responsible Lending, a unit of the Center for Community Self-Help in Durham, N.C., is not handing out any seals of approval. (The centers are affiliated with the $184 million-asset Self-Help Credit Union of Durham.)
Eric Halperin, a senior policy counsel at the Center for Responsible Lending, said Profit Technology executives were willing to listen to concerns about overdraft products, but he would not offer an opinion on its product.
"Based on the information they have given to me it would be premature for me to characterize their product," Mr. Halperin said.
The center's report said consumers are often signed up for overdraft protection products that levy heavy fees for bounced checks without their consent. Additionally, third-party vendors encourage banks to clear customer checks from highest to lowest to increase overdrafts, Mr. Halperin said.
"What we think these vendors are really saying is, 'We'll offer programs that encourage people to overdraw,' " he said.
