Houston, TX (PRWEB) October 28, 2004 -
Â The five major federal agencies that regulate banks, thrifts and credit unions have released a new brochure, ÂProtect Yourself From Overdraft and Bounced Check Fees,Â drawing praise from a leading consultant on overdraft privilege programs.
ÂThe timing is excellent, since many accountholders are evaluating these popular programs, and ÂCheck 21,Â which will cut the ÂfloatÂ dramatically, became effective today,Â said Cheryl Lawson, EVP-Operations for John M. Floyd & Associates of Houston. (Photo: http://www.jmfa.com/execteam_lawson.asp?pic=8)
Consumers can obtain the brochure online at http://www.federalreserve.gov/pubs/bounce/. There also is a "contact us" link on that Web page that will take consumer questions.
Lawson, who has more than 20 years experience in global information technology and financial operations, consulting, communications and training, attended todayÂs meeting of the Consumer Advisory Council (CAC), which advises the Board of Governors of the Federal Reserve System. A former employee at Chase Manhattan Bank and Bankers Trust Company of New York, she provided information on overdraft programs to the CAC and spoke to the media.
ÂThis new brochure does not endorse overdraft programs, also known as courtesy pay or bounce protection,Â she emphasized, Âbut it does clearly explain the various options. The key message to consumers is that the best way to avoid fee charges for nonsufficient funds (NSF) transactions such as bounced checks and ATM withdrawals is to wisely manage your accounts.
ÂConsumers should keep an accurate, current check register, record their electronic transactions (ATM, Internet, ACH) and their automated bill payments, and regularly, carefully monitor account balances,Â she noted.
ÂFees on overdraft programs, an average of $22.50 in 2003, are typically the same as the institutionÂs NSF fee. These programs help accountholders avoid additional charges from merchants and the embarrassment of dealing directly with a valued retailer,Â Lawson explained.
Floyd and Associates, a 32-year-old profitability consulting firm, was the first company to develop an automated, nondiscriminatory overdraft program in 1988. JMFA has installed variations of its JMFA OVERDRAFT PRIVILEGESM in more than 750 financial institutions. Its founder, John M. Floyd, has spoken extensively coast to coast against the abuses endemic to some overdraft programs as implemented and managed.
The brochure answers basic questions on how bounced checks and overdraft charges occur and how to avoid them. It covers the costs of the various plans as well as alternatives to such programs and how consumers can resolve a problem with the program or file a complaint with a regulatory agency.
ÂAlthough the brochure calls the overdraft programs Âa costly form of credit,Â the Federal Reserve System has ruled that payment of an accountholderÂs NSF item is not a loan and not an extension of credit under the Truth in Lending Act,Â Lawson stated.
Check 21 May Stimulate Overdraft Programs
The Check Clearing for the 21st Century Act, known as ÂCheck 21,Â became effective Oct. 28, with an estimated 5% of the nationÂs 18,000 financial institutions expected to take immediate advantage of its provisions, Lawson observed. ÂAnd that is going to catch some check-writers off guard. ItÂs another reason the Fed brochure is timely and welcome and that overdraft programs can be helpful.Â
Check 21 allows financial institutions to electronically exchange checks (or Âshare drafts,Â if a credit union) through digital imaging, as opposed to previous requirements demanding physical transport and processing of paper checks. That could cut the ÂfloatÂ Â the time between writing a check and the payee cashing it Â from as many as five days to a matter of hours.
ÂBy some estimates, the handling of a single check, now as many as 12 times, will drop sharply,Â she said. ÂFinancial institutions, now clearing an estimated 40 billion paper checks annually, will have to make a substantial investment in check imaging equipment and processes in the next three to five years. That $10 billion cost could potentially save $2 billion to $3 billion a year.
ÂFor institutions, automated overdraft programs will ease the decisioning burden on paying or returning the accountholderÂs check. It also reduces item processing by 10% to 30% and improves non-interest income,Â Lawson contends.
ÂMuch of that income is not new, but simply redirected fees from accountholders who might otherwise utilize and pay credit cards, payday lenders, check cashers, etc. for short-term assistance. The federal agencies, the regulators and the consumers should all realize that fact.Â
FOR MORE INFORMATION OR INTERVIEWS:
Cheryl Lawson, EVP-Operations, John M. Floyd & Associates, Houston, 866-610-0900 or 281-424-7570; e-mail: Cheryl.Lawson@JMFA.com; Web site: http://www.JMFA.com;
Preston F. Kirk, APR, Kirk Public Relations, Austin TX, 830-693-4447; firstname.lastname@example.org
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