Q: What is meaningful and effective follow-up for chronic or excessive use and how can an institution demonstrate it has made meaningful efforts to reach chronic or excessive users of automated overdraft payment programs?
A: Meaningful and effective follow-up means that the institution has made reasonable efforts to provide the customer with information on alternatives to overdraft payment programs that may be better-suited to the individual’s need for short-term credit, as well as a clear mechanism for the customer to avail himself or herself of those alternatives. The key goal is to ensure that customers are able to make informed choices among available options to manage recurring needs for short-term credit. The FDIC will assess the institution’s level of effort to reach customers, the institution’s program for providing notice to customers of available alternatives, and the ease with which customers are able to select alternative products.
Institutions may employ a variety of techniques, based on individual customer profiles and general business practices, to contact excessive or chronic users of overdraft payment programs. For example, the institution’s overall approach could incorporate contacting a customer via telephone, in person, by mail, or through electronic notifications. Relevant factors include whether the institution:
- Has a regular program to inform excessive or chronic users of overdraft usage and cumulative costs in a prominent or conspicuous fashion;
- Highlights availability of alternatives to overdraft payment programs that may be lower-cost or more appropriate; and
- Provides a clear and simple manner to contact the institution to discuss available alternatives.
The institution should be able to demonstrate that it monitors account usage, undertakes programs designed to address excessive or chronic use, and monitors its success in informing frequent users of overdraft payment programs of the high cumulative costs of the program and the availability of less-costly or otherwise more appropriate alternatives.
Two examples of ways in which an institution could demonstrate meaningful and effective follow-up regarding excessive or chronic users of overdraft programs are to provide enhanced periodic statements or employ a targeted outreach approach. Specific information discussing meaningful and effective follow-up when utilizing these approaches is described in the attached Illustrations. Institutions may employ other approaches for engaging in effective and meaningful follow-up with chronic or excessive users.
This can be found in FAQ II-2 of the FDIC’s Overdraft Payment Program Supervisory Guidance FAQs. The FAQs can be found at: http://www.fdic.gov/news/conferences/overdraft/FAQ.html