The “fly” feels a rant coming on.
In case you haven't heard, the FDIC recently released findings of its 18-month study of automated overdraft programs (aka courtesy pay programs) at banks.
The Executive Summary (click hereto read it) is chock full of demographics and other numbers of interest. For instance—as with our own experience—75 percent of consumer accounts had no NSF transactions during the 12-month period examined; meaning, the overdrafts were written by only 25% of an institution’s accountholders, namely those who needed the service the most.
We at BSG Financial consistently hear how our overdraft management program helps consumers who get into a money crunch by honoring NSF checks, instead of returning them. Unfortunately, stories like this one in USA Today or this one from Fox Newsreport only the most negative aspects of the FDIC Study.
These types of articles fail to explain that whether a financial institution returns a check or not, the consumer incurs an NSF fee from the bank if funds are not available. If the financial institution honors the check, however, the consumer is spared return fees from the merchant, late fees, and negative credit.
The fact is: it is the 25% of consumers mentioned above that consistently and purposely use automated overdraft programs in order to avoid these problems. They understand how the service works and they appreciate its availability when they need it.
These reports also omit the fact that many financial institutions with automated overdraft programs responsibly remove repeat users or social security recipients from the program (although we have had client banks report that those removed often call and beg to be added back in).
The stories seem to gloss over the fact that all reputable programs INFORM the consumers of the service and OFFER EASY WAYS TO OPT OUT. In many cases, the consumer does not qualify for overdraft protection alternatives, such as automatic lines of credit, so their choice is to remain in the automated overdraft program.
Does your institution offer an automated overdraft program? If so, share your experiences and let us know if they match the ones reported above.