JMFA Overdraft Privilege Program
It’s rare that a new member service is able to increase both member satisfaction and non-interest income to the credit union at the same time. But an overdraft privilege program from John M. Floyd & Associates (JMFA) can accomplish just that.
What is an overdraft privilege program?
An overdraft privilege program is a structured way that allows members to overdraw their checking or share draft account within pre-established limits.
An overdraft privilege program is not administered like a loan, because it is a service rather than a loan. Members may overdraw their transaction accounts subject to a one-time, pre-established limit. The overdrawn account must return to a positive balance every thirty days.
How do members benefit?
An overdraft privilege program allows members who occasionally have an overdraft situation to discreetly manage their accounts. It means they no longer have to pay a "bad check" fee to a local retailer nor have their checks posted behind the counter for the world to see.
About 25% of credit union members incur NSF charges during the year. Studies indicate that the average consumer writes about 3.4 NSF items a year, with an average NSF fee of $22.50. By offering this service, credit unions benefit from greater member satisfaction as well as a boost to their non-interest income. Members are able to avoid the embarrassment of a bounced check by paying a single NSF fee per item to their credit union to cover the item – rather than paying the merchant returned check fees on top of any credit union charges.
While the majority of members will consider the service merely as a "safety net," a significant number of members look at the program as a useful financial service from their credit union.
How do credit unions benefit?
Overdraft privilege programs provide a win-win for credit unions and members alike. Members benefit by no longer being humiliated about having a "bad check" – with an overdraft privilege program they can avoid paying double fees (to the retailer and to the financial institution). At the same time, credit unions can expect to increase their NSF income anywhere from 50 to 300 percent after program implementation.
What’s the bottom line? By increasing the number of your share draft accounts and NSF activity, you’ll be generating more transactions and producing more revenue per member. Currently, more than 2,000 financial institutions nationwide offer a defined overdraft privilege program.
What are the credit union’s responsibilities?
The steps involved in a credit union implementing an overdraft privilege program themselves can be daunting. Those responsibilities include:
- Establishing pre-set limits for members based on a thorough analysis of share draft activity.
- Developing disclosures and procedures in order to comply with applicable regulations.
- Creating a program to educate both existing and new members.
- Training employees on how to explain the advantages of overdraft privilege to members, as well as provide training on the compliance and operational issues of the program.
- Developing an automated collection system that interfaces with the credit union’s core processing system.
The JMFA Overdraft Privileges program assists credit unions with each of these responsibilities.
JMFA is the Industry Leader
Since 1972, John M. Floyd & Associates has successfully delivered effective profitability enhancement services to over 1,750 financial institutions throughout the U.S. and Latin America. JMFA is the original developer of overdraft privilege programs and offers guarantees for 100% compliance with state and federal agencies, 100% core processor compatibility, and 100% customer satisfaction.
JMFA also provides recommendations for disclosures, notifications, account holder education support materials, and procedural changes that have been reviewed by state and federal examiners for more than 15 years without complaint.
JMFA offers a Superior Product
After hundreds of installations, the JMFA Overdraft Privilegesm program consistently outperforms competitive programs. JMFA provides more analysis, evaluations and in-depth recommendations than its competitors.
With Privilege Manager CRM™ software, JMFA provides credit unions with the best Windows® based software to track all NSF activity and effectively administer your program. Privilege Manager CRM™ helps credit unions reduce charge-offs by automating collection procedures for overdrawn accounts. It also provides management with detailed reports to monitor and track the credit union’s program.
Support Makes the Difference
As part of the installation process, JMFA conducts onsite training of credit union employees on every aspect of the JMFA Overdraft Privilege program. JMFA also provides three years of post-installation support at no additional charge. Additionally, each quarter, JMFA conducts an onsite review of the program with credit union management to help ensure the success of the program.
Guaranteed Results
JMFA’s fees are completely performance-based, which means it only makes money when the credit union does.
Getting Started
For a free, no-obligation, profit improvement analysis and program projection, simply ask your Association Representative at 800-932-0661 or e-mail productinfo@pcua.coop.
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