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Account Overdraft Programs Must Be Managed Responsibly, Fairly, Leading Vendor JMFA Advises Credit Union Execs at NAFCU Conference.

Business Editors

NAFCU Conference


BOSTON--(BUSINESS WIRE)--July 22, 2003

John M. Floyd & Associates team speaks out

on programs' benefits and abuses.

Share draft (check) overdraft programs must be consumer friendly and nondiscriminatory, if there is to be a win-win situation for credit unions and their members, contends a leading U.S. vendor of such automated programs.

John M. Floyd, CEO of John M. Floyd & Associates of Houston, is leading a team of eight JMFA regional directors at the National Association of Federal Credit Union's (NAFCU) 36th Annual Conference & Exhibit meeting in Boston (July 23-26). The team of consultants is personally briefing executives on the benefits and abuses of the popular overdraft protection programs, which are now drawing criticism from consumer advocacy groups and attention from federal regulators. (Digital Floyd photo available at:

NAFCU opened its meeting at the John B. Hynes Veterans Memorial Convention Center today (7/23) with more than 2,300 credit union representatives, exhibitors, speakers and spouses expected to attend. (JMFA is located at exhibit spaces #716 and #718.) The trade association has more than 800 member credit unions serving more than 83 million members. The event provides opportunities to exchange ideas, to hear leading industry speakers, to learn about innovative technology and services, and to attend sessions addressing critical industry issues.

Floyd, a 30-year veteran of banking and financial products and founder of the profitability-consulting firm, has implemented variations of JMFA'S Overdraft Privilege(SM) program at more than 400 credit unions, banks and thrifts. The Alabama, Florida, Michigan, Mississippi, New Jersey, New Mexico and Texas credit union leagues have recently named JMFA as their "Preferred Provider" or "Partner" for marketing the program ( to their affiliates.

"All financial institutions must act responsibly in marketing and managing overdraft protection programs to avoid member/customer complaints and to head-off unnecessary state and federal regulation," Floyd warns.

Floyd has been speaking nationwide, promoting benefits of his overdraft privilege program and cautioning against operational abuses of some programs that have raised the ire of consumer advocates and drawn the attention of the Federal Reserve System. Floyd has been unequivocal in noting "room for improvement" when he addressed the Fed's Consumer Advisory Council and the American Bar Association's Business Law Section in Los Angeles this spring.

Economy Stimulating Overdraft Programs

Of the nation's nearly 18,000 financial institutions, more than 1,600 have "defined or communicated" overdraft programs, Floyd notes. "The current economy is motivating many more to adopt this program to bolster member services and to supplement falling non-interest income."

Overdraft privilege programs cover share drafts that would otherwise go unpaid due to nonsufficient funds (NSF) in an account holder or credit union member's account. The privilege also may extend to a member's ATM or debit card. The member is permitted to overdraw his/her transaction accounts, subject to pre-established limits, for a fee ranging from $17 to $35 (average $22.50) per item. The overdrawn account must return to a positive balance within a set period, generally no more than 30 days. On average, the member writes three per year.

Some consumer groups argue that the programs are over-promoted, condone irresponsible money management by the member/customer, charge "mystery fees" and are aimed at displacing "payday lenders." They contend that they violate the Truth in Lending Act.

On March 28, the Federal Reserve System, noting that the programs "vary from vendor to vendor and . . . in their implementation from institution to institution," announced that its "staff is continuing to gather information on these services, which are not addressed in the final rule." The rule refers to Reg Z, which covers the Truth in Lending Act and "bounce protection" programs.

Brian R. Witt, chairman of the Credit Union Committee of the American Bar Association, agreeing with Floyd's premise, stated in the May issue of Credit Union Magazine: "The hidden, unquantifiable costs of not covering overdrafts could be more insidious than the overdraft fees now imposed under current disclosure laws."

JMFA creates a strategic program specific to each financial institution, 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.

"Institutions, which can improve their profits with a valuable and viable service to members, have no reason to remain on the sidelines," Floyd insists. "Fact is, millions of middle class Americans live from paycheck to paycheck. Responsible marketing and good consumer education prevents habitual use."

Multiple Benefits...Variable Programs

The discreet service avoids the humiliation of members "making good" on a share draft/check with a valued retailer, he explained. Neither the customer nor the merchant loses time or productivity in "straightening out an NSF mess, JMFA consultants explain. Consumers don't wind up on bad-check lists.

"Members would rather pay one $25 NSF to their financial institution than pay multiple, higher charges from a merchant, or larger late payment penalties on a house note, car loan or tuition payment," Floyd emphasizes. "Members also avoid bad marks on their credit record or potential visits from law enforcement for inadvertent -- but repeat -- NSF checks, as well as having to resort to borrowing from friends, family or not so benign sources for temporary funds.

"Not all overdraft programs are created equal," he adds. "Some NSF checks are covered at the discretion of a credit union executive, and some are a line of credit requiring a credit application, credit check and advance fee. Some credit unions cover share drafts by transferring funds from the member's other accounts or getting advances from a credit card.

"In a member-friendly, well-run program, members and account holders at all income levels enjoy the program's benefits - not just 'premium' and 'platinum-type' members," Floyd insists. "We are proud that Floyd & Associates' nondiscriminatory overdraft privilege program complies with all existing Federal Reserve System regulations as well as currently suggested changes.

"Institutions must not force overdraft privilege on their members. They must avoid messages that essentially encourage members to repeatedly overdraw. They should educate and consistently inform members of their overdraft limits on their monthly statements and when they use an ATM to access their account balances so as to avoid triggering unexpected charges," he stated.

NAFCU exclusively represents the interests of federal credit unions before the federal government and the public. The influential trade association provides its members with representation, information, education and assistance to meet the challenges that cooperative financial institutions face in today's economic environment. NAFCU stands as a national forum where new ideas, issues, concerns and trends can be identified, discussed and resolved.


John M. Floyd, CEO, John M. Floyd & Associates, 1-800-231-9925;,

Preston F. Kirk, APR, Kirk Public Relations, Austin TX, 830-693-4447;
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Date:Jul 22, 2003
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