Overdraft compliance review services

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We understand your challenges As the banking industry continues to transform after the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) in response to the financial crisis of 2007–2009, the banking regulators and the Consumer Financial Protection Bureau (CFPB) have narrowed their regulatory focus on a number of “hot button” issues in an effort to protect consumers. One of those issues is the use of “automated” overdraft payment programs offered by financial institutions. Banks and credit unions have expanded the types of overdraft payment programs offered, in many cases offering overdraft protection that imposes substantial fees and interest on consumers. Many “automated” overdraft programs offered today are provided through third-party vendors who develop systems designed to maximize the amount of fee income generated. As consumer fees have increased — along with the complexity of overdraft payment products — so too have consumer complaints, oftentimes alleging vague and disproportionate fee structures compared with the amount originally intended to be funded.

According to a report released by the CFPB in June 2013, the Bureau found significant differences across institutions regarding overdraft coverage on debit card transactions and ATM withdrawals, raising concern about how banks and credit unions sell their overdraft payment programs. As a result, the CFPB is expected to release new guidance in mid-2015 pertaining to these overdraft programs.

With the CFPB’s intensified focus on consumer protection in relation to overdraft payment programs, compliance risk is significant for banks and credit unions. For institutions executing compliance programs without specifically tailored monitoring of overdraft practices, significant financial and reputational implications may loom. Formal enforcement actions issued by the CFPB, Federal Deposit Insurance Corporation (FDIC), Federal Reserve (FRB), and Office of the Comptroller of the Currency (OCC), including civil money penalties, remain at all-time highs. As recent headlines indicate, lack of compliance with rules, regulations and guidance dictating overdraft payment program compliance can have far-reaching consequences.

How we can help Grant Thornton LLP provides the experience and industry-leading insight to help your institution design and maintain its overdraft payment program in compliance with evolving laws and regulatory guidance. Grant Thornton’s Regulatory Center of Excellence features subject matter experts who have direct, hands-on experience assessing and developing comprehensive compliance programs — including a specific focus on overdraft payment programs — for institutions of all sizes.

We have your solutions Specifically, our overdraft program reviews include the following services:
•  Review of policies and procedures governing your institution’s overdraft program
•  Conducting a mock customer application process to determine if customers are provided with sufficient information regarding their ability to opt in and opt out of various overdraft coverages, including those governed by Regulation E
•  Assessment of the role of the compliance department and the effectiveness of compliance audits, including a comprehensive assessment of monitoring and oversight processes
•  Examination of your overdraft training program
•  Analysis of consumer complaints pertaining to your overdraft products and services to facilitate trend analysis and identify overdraft compliance risk
•  Review of your third-party/vendor management practices and controls for adequacy of monitoring functions
•  Transactional testing of your institution’s overdraft product portfolio to determine accuracy and adherence to product disclosures, terms and conditions
Our overdraft program review services assess your institution’s overdraft product offerings against the following factors that affect overdraft compliance:

  • Deposit funds timing and availability
  • Manner in which banks treat holds resulting from debit card authorizations
  • Posting order of transactions
  • Methods and thresholds used to set overdraft coverage limits
  • Whether and how fees are charged for sustained negative balances
  • How overdraft payment programs are promoted, as well as how new account applicants are screened
  • Availability of waivers or delays for assessing fees on accounts with de minimis or short-term overdraft transactions

Grant Thornton Regulatory Center of Excellence Our Regulatory Center of Excellence features individuals who have led numerous engagements focused on overdraft program compliance. The Regulatory Center of Excellence provides access to professionals who have served in leadership and supervisory roles at regulatory agencies such as the FDIC, the Board of Governors of the Federal Reserve System and the OCC, in addition to individuals who have led institutions through numerous CFPB compliance examinations. Tariq Mirza leads Grant Thornton’s Regulatory Center of Excellence, having spent 22 years in various prominent roles at the FDIC and having been involved in more than 1,500 regulatory examinations. Under his direction, Grant Thornton stands ready to help guide your institution through a readiness review to make sure that you are adequately prepared for your next compliance examination.

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Contact Tariq Mirza
National Managing Director, Regulatory Center of Excellence
T +1 202 251 8677

Drew Genser
Senior Associate, Regulatory Center of Excellence
T +1 703 856 1082