California Credit Union League Emphasizes Regulatory Compliance on Overdraft Programs; League Partner Offers Compliance and Performance Review to Calif., Nevada CUs

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The California Credit Union League, which serves California and Nevada credit unions, promotes compliance with federal regulations for members with overdraft privilege (courtesy pay or bounce-safe) programs, recommending John M. Floyd & Associates of Baytown (Houston) Texas for its Compliance & Performance Review program.

California and Nevada credit union executives challenged to bring their overdraft programs into compliance under strict federal guidelines can get a no-obligation compliance and performance review from the California Credit Union League’s preferred strategic alliance provider.

John M. Floyd & Associates, Inc. of Baytown, TX, (near Houston) has developed the JMFA ODP Compliance and Performance ReviewSM (CPR) program to ensure that existing overdraft privilege programs – also known as “bounce protection” and “courtesy pay” – apply Interagency regulations and industry recommendations issued in 2005. JMFA pioneered the automated, nondiscriminatory overdraft program in 1988.

“We’re pleased to have John M. Floyd & Associates as a League business partner,” said David L. Chatfield, President and CEO of the League, which serves credit unions in California and Nevada. “JMFA has implemented more than 1,000 variations of JMFA overdraft privilegesm, and is partnered with leading national core processors serving financial institutions. In addition, 20 credit union leagues representing more than 20 states and the District of Columbia have named JMFA either an ‘endorsed’ or a ‘preferred’ provider/partner for overdraft privilege, including the California League in September 2003.”

“We believe our focus on C.U. members, our attention to regulatory compliance and our best management practices have heightened our reliability in fine-tuning any existing overdraft program under the multiple sets of new guidelines and issued regulations,” said Steve Swanston, EVP-Sales for JMFA. “We have recently assigned Ray Keel, (Photo URL: JMFA field executive, based in Sacramento to work with California, and Alton Arnett ( ) to work with Nevada credit unions.

“No matter how successful a financial institution’s overdraft program has been, if management is not reacting to industry changes and new regs, it will raise consumer concerns,” Swanston emphasized. “Our review can help financial institutions avoid compliance violations while providing a program that serves, rather than takes advantage of accountholders.”

“Not only has JMFA stayed on top of all the latest regulations from day one, it also continues to guarantee 100 percent compliance with state and federal regulations,” Chatfield stated.

JMFA’s comprehensive review assesses all aspects of compliance, including federal Regs B, E,

Z, DD, Part 707 of NCUA Rules and Regulations, the FTC Act and Interagency Guidance. The firm reviews risk policies and procedures to test the overdraft program’s consumer friendliness. JMFA also looks at such key performance indicators as income and charge-offs to make sure the institution reaches peak potential.

“We also assist the financial institution with technology upgrades to help streamline processes that improve efficiency and reporting,” Swanston added. “And because personnel turnover can be an issue, JMFA provides all the products, tools and training required to update staff members responsible for communicating with accountholders and administering the overdraft program.”

Tracey Kerr, CEO of MOCSE Central Valley Federal Credit Union, a $195 million credit union in Modesto, CA, and a client of JMFA, commented: “We've seen an additional $650,000 in non-interest income since August 2004 that we would have never seen if not for the JMFA overdraft privilege SM program. We selected JMFA for its fees flexibility and guaranteed 100% compliance, but we also had a wonderful experience working with the JMFA team that helped deliver a seamless implementation process. Additionally, our customers love the program."

The government guidance – issued by the Federal Reserve Board, Federal Deposit Insurance Corporation, National Credit Union Administration (NCUA) and the Office of the Comptroller of the Currency – addresses safety and soundness considerations, legal risks and best practices. The Office of Thrift Supervision issued a separate set of recommendations.

The combined objective is to eliminate such abuses as discriminatory availability, over-promotion, under-education of consumers on the program’s proper use and individual overdraft limits based on a ‘mystery matrix’ unknown to the accountholder.

“The agencies want to avoid the promotion of poor account management; to provide a clear explanation of the discretionary nature of the program; to clearly disclose fees and to explain the impact of transaction-clearing policies on the overdraft fees which consumers may incur,” Swanston said.

“Even the NCUA has an extensive checklist of recommendations,” he stated. “Our mutual efforts can help credit unions establish a consumer-friendly overdraft privilege programs before the examiners arrive on their doorstep with a fistful of complaints!”

Overdraft Privilege Benefits

“Overdraft privilege is a discreet service that enables credit union members to avoid the embarrassment of ‘making good’ on an item with a valued retailer or creditor,” explained Sylvia Fath, the League’s Vice President of Business Services. “It saves the consumer and the merchant time and productivity in straightening out a nonsufficient funds (NSF) situation.

Members avoid retailers’ bad check lists and additional NSF charges from a merchant or an expensive late payment penalty on an installment loan.

“Such programs also can prevent negative entries on their credit record or potential visits from law enforcement for inadvertent – but repeated – bad drafts,” Fath added. “Automated programs like JMFA overdraft privilegesm also help identify troubled accounts for necessary counseling. A well-managed overdraft program is a win-win-win for the consumer, the retailer and the financial institution.”

“Overdraft privilege allows credit unions to increase their non-interest income without raising fees or making any capital outlay, by integrating into their existing core data processing system a program that makes nondiscriminatory, automated NSF decisions,” Swanston added. “With overdraft privilege, credit unions don’t have to scan each day’s presented items and determine manually which overdrafts to honor. They also get a proven program that improves staff productivity and eliminates the cost of building their own NSF system from scratch.”

About the California Credit Union League

With headquarters in Rancho Cucamonga, the California Credit Union League provides information, education, advocacy and support services to more than 450 credit unions in California and Nevada. More than 10 million Californians and Nevadans are credit union members. There are more than 9,000 credit unions in the United States, with more than 85 million members.

About JMFA

JMFA, a leading provider of non-interest or fee income products to financial institutions, has installed performance improvement programs in more than 2,000 credit unions, banks and thrifts in the past 30+ years, adding billions of dollars in increased pre-tax earnings for its clients in 49 states and Central America.

JMFA overdraft privilegesm and JMFA ODP Compliance and Performance ReviewSM are service marks of John M. Floyd & Associates, Inc.

For more information or interviews:

For information, Patrick Truninger, Director of Business Development, California Credit Union League, 909-581-3286,

For interviews, Tina Ramos-Ingold, Public Affairs Coordinator, California Credit Union League, 909-581-3422, Fax: 909-581-3462:

Steve Swanston, EVP-Sales, John M. Floyd & Associates, Baytown, TX, 800-809-2307,

Preston F. Kirk, APR, Kirk Public Relations, Austin, TX, 830-693-4447


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