Action vs. Reaction

by Elizabeth Sherman 31. March 2010

I have been working in cash management for over 10 years. In that time various products move to the forefront of popularity. Commercial analysis accounts and overnight investments take the lead when rates are high. Online banking becomes more popular when software companies upgrade their operating systems and Remote Deposit Capture becomes the “must have” product during bad weather. (Yes – there was a silver lining to 80+ inches of snow!)

If you notice, these product sales are reactionary. Event A happens and triggers Event B. The same reactionary behavior occurs with Positive Pay. A company experiences fraud through a stolen or counterfeited check and suddenly Positive Pay becomes the product of the month.

Positive Pay was created to help prevent fraud on business checking accounts. As checks are issued, the payee name, check number, date and amount are entered in an online banking application. As those checks clear through the bank, they are matched up against the initial information entered by the customer. If there are any discrepancies between the actual check and the information entered, the check is considered as an “exception item” and the customer is notified through the online banking application. This notification allows the customer to decide whether to pay or return the potentially fraudulent item.

Over the last 3 years, with our current economic condition, I have seen an increase in episodes of fraud with my business clients as well as a spike in the implementation of Positive Pay. It is true this product requires the customer to actively manage the checks issued from and clearing their accounts, however, the benefits of Positive Pay far outweigh any perceived inconvenience.

Let’s make the implementation of Positive Pay an “action” rather than a “reaction”.

FDIC Article on Convenience Checks

by Wade Barnes 15. March 2010

Convenient or expensive??  The FDIC posted an article on convenience checks issued by credit card companies.  While this may be a convenient service for many borrowers, it may come with expensive fees and unseen pitfalls from overdraft fees to fraud if you're not careful.  Check out the FDIC's article:


Making Sense of the Overdraft Fee Changes

by Kevin Lynch 15. March 2010

As many people know by now, one of the largest banks in the country recently announced changes to the way they will deal with overdrafts on certain ATM and debit card purchases later this summer. This announcement is a direct result of regulatory changes mandated by the Federal Reserve around Regulation E, the Electronic Funds Transfer Act. They've chosen to make the decision for the customer by eliminating this service completely.

We will admit that the changes are somewhat challenging to understand and it would probably be easier for us to handle these changes the same way. But franky, we don't think that is the right approach for our customers. Rather, we want to you to understand how this is going to impact you (if at all) and provide you the opportunity to make the decision based on facts.  Below I've provided some information on the changes, when they go into effect, and examples of how this could impact customers. Please feel free to comment and provide feedback. 

Regulation E, Electronic Funds Transfer Act changes in 2010

Regulation E provides a basic framework that establishes the rights, liabilities, and responsibilities of participants in electronic fund transfer systems such as automated teller machine (ATM) transfers, telephone bill-payment services, point-of-sale (POS) terminal transfers in stores, and pre-authorized transfers from or to a consumer's account (such as direct deposit and social security payments).

The term "electronic fund transfer" (EFT) generally refers to a transaction initiated through an electronic terminal, telephone, computer, or magnetic tape, instructing a financial institution to either credit or debit a consumer's asset account.

Beginning in 2009, in response to consumer advocacy groups, the Federal Reserve revised Regulation E to address retail checking account overdraft fees on certain consumer transactions. The final rule prohibits a financial institution from assessing an overdraft fee applicable to overdraft services for ATM and one-time debit card transactions unless the consumer agrees to the overdraft service for those types of transactions.

When do the new regulations go into effect?

  • July 1, 2010 - for any new consumer checking accounts
  • August 15, 2010 - for all existing consumer checking accounts opened prior to July 1, 2010

What transactions are included in the rule change?

Automated Teller Machine (ATM) transactions

One- time debit card transactions, such as gas purchases

What transactions aren’t included in the rule change?

  • Checks, including paper and electronic
  • ACH electronic payments, like your mortgage or insurance premiums
  • Recurring Visa Debit Card transactions, such as a monthly gym membership
  • Payments of an overdraft through a line of credit

What do I have to do?

In the next couple of months, you will receive a mailing from us with a form to “opt in” or “opt out” of overdraft protection for ATM and one-time debit card transactions for each consumer checking account you have with us. You will have until August 15, 2010 to respond. If we don’t receive a response from you, we will assume that you do not want the overdraft protection service for ATM and one-time debit card transactions.

How could this impact me?

If you don’t have this overdraft service as to ATM and debit card transactions, such transactions would be declined if you do not have sufficient funds in your account. For example, if you went to the grocery store and attempted to pay using your debit card, your transaction would be declined.

“Opting in” versus “opting out” of accounts with the overdraft service

For consumer accounts that have our overdraft service, here is an example of how these items might be handled differently between a customer who “opts in” or “opts out” of overdraft protection for ATM and one-time debit card transactions. Included in this example are both types of transactions.

Opt In Running Balance Result Fees
Available Balance $50

ATM Withdrawal -$200 Paid -$35
Gas purchase -$60 Accepted -$35
Ending Balance -$280

Opt Out Running Balance Result Fees
Available Balance $50

ATM Withdrawal -$200 Declined $0
Gas purchase -$60 Declined $0
Ending Balance $50

So, a retail customer who has the overdraft privilege for ATM and one-time debit card transactions, would have the items paid and be charged the appropriate fees for this service. We would love to hear your thoughts and questions about these changes. Please feel free to respond to this post and look for continuing updates on our web site.

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