828 Main St, 15th Floor Lynchburg VA 24504 www.countsauction.com Call us for your Auction & Appraisal needs. 434-525-2991 that can avoid assessing fees for items authorized on a positive balance. Several core processors offer such capabilities — financial institutions can avoid regulatory criticism by implementing the necessary APSN technology. What to Expect from Regulatory Examinations Being ready for anything and everything is the best way to approach regulatory exams in this somewhat uncertain climate. Expect examiners will arrive with a longer checklist of questions about your overdraft program than in the past. To prepare for these examinations, community banks should: • Stay up-to-date on the latest regulatory guidance and industry insights • Review their overdraft fee policies and procedures to ensure compliance with regulations • Analyze their fee structure to ensure it is fair and reasonable • Consider implementing strategies to reduce consumer costs, such as grace periods, de minimis thresholds, proportional fees and reasonable fee amounts Strategies to Reduce Consumer Cost In addition to implementing technology solutions and preparing for regulatory examinations, financial institutions can also consider implementing strategies to reduce consumer costs associated with overdraft fees. These strategies include: • Providing a grace period: If a transaction is presented that would trigger an overdraft or NSF fee, give the account holder a grace period to make a deposit and then refund the fee. • Introducing a de minimis: Instead of charging a fee for every transaction that takes an account negative, consider only charging the fee if the account becomes negative by a threshold amount. • Implementing proportional fees: Consider establishing a smaller fee amount based on the transaction amount. • Ensuring reasonable fees: Assess the reasonableness of your overdraft and NSF fees relative to the local market to ensure the fees are not prohibitive. Make Informed Decisions While some financial institutions have heavily marketed their low or “eliminated” overdraft fees, that doesn’t necessarily mean your fee needs to change. Instead of making sweeping changes based on what others are doing, ask yourself, “What are our fees, and why were they set that way?” If you’ve raised your fees over time and now yours is higher than the rest in your market, maybe a change is needed. But if your consumers believe your overdraft fee is fair and you’re not having issues with unrecoverable losses, your fee may be appropriate. More importantly, a thorough analysis of your program and fee structure will help uncover any necessary changes to ensure you’re offering a consumer-first overdraft solution. Cheryl Lawson serves as JMFA’s principal liaison for regulatory requirements of overdraft services, including consumer protection issues and strategies to enhance safety and soundness. About ADVANTAGE ADVANTAGE, powered by JMFA, is a trusted consulting partner helping community banks improve their overdraft strategy and stay competitive with a compliant, consumer-first overdraft solution. 18 The CommunityBanker
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