Icul Service Corp. Endorses Floyd & Associates for Overdraft Privilege Program - Automated Program Helps Members Avoid Hassle, Added Costs of Bounced Drafts (Checks)

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Subsidiary of Illinois Credit Union League selects JMFA Overdraft Privilege as its preferred program for its credit union affiliates and their members. C.U. execs and consultants explain why along with the benefits of the program and the abuses endemic in poorly managed programs.

Illinois credit union members who bounce share drafts (checks) can avoid embarrassment, inconvenience and additional costs, if their credit union offers a new overdraft privilege program endorsed by ICUL Service Corporation (LSC).

LSC, the business subsidiary of the Illinois Credit Union League, has signed an agreement with John M. Floyd & Associates, Inc. (JMFA) of Houston, naming the profitability-consulting firm as its "business partner" for the JMFA OVERDRAFT PRIVILEGESM program.

The League, formed in 1930, represents 399 affiliated credit unions with combined assets of more than $20.8 billion and a membership of about 2.5 million. ICUL, the primary trade association for Illinois credit unions, provides information, legislation and education.

LSC provides products and services that help ICUL affiliates effectively compete and prosper in the financial marketplace. It is the largest LSC in the nation, serving nearly 700 credit unions in 26 states. LSC operates an ATM network; mortgage banking, check processing, and credit and debit card processing facilities; collection, insurance and ad agencies, and a finance company through which it produces auto loans for sale to credit unions.

Through contractual arrangements, Floyd & Associates now has approvals to jointly offer its overdraft privilege program with leagues, associations or their service firms representing 21 states. JMFA also has a business associate relationship with the Delaware Credit Union League and is a "strategic alliance provider" with CUNA and Affiliates, as well as endorsed by a leading core technologies solutions provider for credit unions.

Discreet, Value-added Service

"The public is demanding value-added services like overdraft privilege," CEO John M. Floyd has told the Consumer Advisory Council to the Federal Reserve System, the American Bar Assn. and the Consumer Federation of America during the past year.

"This discreet service avoids the embarrassment of bank customers 'making good' on a check with a valued retailer or creditor. Neither the accountholder nor the merchant loses time or productivity in straightening out an NSF (insufficient funds) mess," Floyd said. "Accountholders don't wind up on retailers' bad check lists."

"They can avoid multiple NSF charges from a merchant or late payment penalties on mortgages, car loans or tuition payments. They also can prevent negative entries on their credit record or potential visits from law enforcement for inadvertent -- but repeated -- bad checks," he added

"With overdraft privilege, Illinois credit unions have the opportunity to enhance member satisfaction while also increasing their non-interest fee income," noted George Fiegle, executive vice president/COO of LSC. "Fee income has become more important to bottom lines in an era of declining income from lending."

"We are proud to add Floyd & Associates to our select list of business partners," said Cathy Pettis, senior vice president of LSC. "JMFA's portfolio of products coupled with its competitive pricing and well-recognized customer service clearly made it the best choice for our credit unions and their members."

"Our goal was to identify an outstanding vendor that would combine all the benefits of an overdraft program with the credit union philosophy of focusing on the member’s well being," Pettis added. "I'm convinced our relationship with Floyd will help credit unions implement consumer-friendly programs."

Overdraft Programs Vary Widely

JMFA, founded in 1973, is a leading provider of noninterest or fee income products to financial institutions. The company has installed profit improvement programs in 1,750-plus financial institutions, adding more than $10 billion in increased pre-tax earnings for its clients in 48 states and Central America.

The company also has successfully implemented variations of its overdraft privilege program in more than 650 banks, credit unions, S&Ls and thrifts. "JMFA's overdraft privilege program is nondiscriminatory and guaranteed to be 100% compliant with federal and state regulations, as well as with recently suggested changes," Floyd emphasized. "Our program has a proven track record of producing more income and less charge-offs for financial institutions than typical NSF programs."

He also disclosed:

•    More than 2,000 of the 18,000 financial institutions in the United States are believed to now have defined and communicated overdraft programs.

•    The typical fee charged on an insufficient funds (NSF) check is $17 to $35. The average in 2003 was $22.50.

•    Studies indicate the average accountholder writes about 3.4 NSF items per year.

"A well-managed overdraft program is a win-win-win for the consumer, the merchant and the financial institution," he said. "Additionally, automated programs help identify troubled accountholders for necessary counseling."

The Federal Reserve System, at the urging of consumer advocate groups, including the National Consumer Law Center, has reviewed compliance issues concerning "bounce protection," "courtesy pay" and similar overdraft programs for more than a year. Critics contended the programs need stricter controls under the Truth in Lending Act.

The Fed, however, stated on June 7 that the programs should not be covered under that Act. It proposed no substantive restrictions on them, but did propose some minor changes in the way the programs are marketed and invited public comment on those changes within the next 60 days before it will consider issuing a final rule.

Floyd has been speaking from coast to coast this past year emphasizing the multiple benefits of overdraft programs, as well as the unfair practices endemic to the implementation, marketing and management of some overdraft programs. He has advised consumers, regulators and bankers that some bounce or overdraft protection programs are discriminatory, over-promote the service, under-educate consumers on its use and base overdraft limits on a "mystery matrix".

JMFA creates strategic programs, including PRIVILEGE MANAGER CRM(TM) software, specific to each bank, its organization and its market that maximizes all aspects of NSF revenue. It then delivers expert training, marketing and software to assure successful implementation and full regulatory compliance.

JMFA OVERDRAFT PRIVILEGE(S)M and PRIVILEGE MANAGER CRM(TM) are service marks of John M. Floyd & Associates, Inc. PRIVILEGE MANAGER CRM(TM) is patent pending.

FOR MORE INFORMATION OR INTERVIEWS:

John M. Floyd, CEO, John M. Floyd & Associates, Houston, 800-809-2307 or 281-424-3800;

Web site:http://www.OverdraftPrivilege.org; e-mail, John.Floyd@jmfa.com

Preston F. Kirk, APR, Kirk Public Relations, Austin TX, 830-693-4447; kirk@281.com

Cathy Pettis, SVP, Illinois Service Corporation, Naperville, IL, 800-942-7124;

cathy.pettis@ilcusys.org

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Preston F. Kirk, APR
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