Overdraft Protection Compliance: Is Your Credit Union Prepared?

Beware of complacency when it comes to addressing compliance requirements.


The FFIEC's Joint Guidance for Overdraft Protection Programs (issued February, 2005) and the Final Amendments to Regulation DD (issued in May 2005) are generally recognized as the key regulatory actions that establish the framework for continuation of overdraft payment services within the financial community.

Most credit unions have invested heavily to address compliance requirements mandated under these defining rules of conduct. However, credit unions should keep in mind that it has only been a few months since their overdraft protection programs have been subject to regulatory examination under the additional disclosure requirements of Regulation DD that became effective on October 1, 2006 .

Even if your organization has been examined since October 2006, we caution you against developing a false sense of security or complacence regarding your overdraft payment service compliance status. Why?

“It ain't over ‘til the fat lady sings”

The fat lady hasn't picked up her songbook for quite some time -- and for good reason. The regulatory scene as it applies to overdraft payment programs is far from stable. We shouldn't forget that the political environment remains highly receptive to reacting to consumer protection and safety and soundness issues. Regulators at the federal and state levels continue to demonstrate that they are quick to respond to “ultra-conservative” or “worst possible case” portrayals of potential overdraft protection program abuse surfaced by some consumer advocates and the media, as well as self-styled experts.

So what may have been compliant last year may no longer be even minimally compliant. We work with credit unions on a daily basis, and we continue to observe that many credit unions are not nearly as compliant as they should be and most do not have the up-to-date best practices in place that regulators want .


Interpreting and implementing new overdraft protection regulations and rule changes is a perpetual effort. New rules, regulations, directives, and court decisions continue to evolve, creating a never-ending source of compliance issues and requirements.

Let's face the facts. In spite of your very best efforts, it is not reasonable to expect that your staff will know all of the important details, all of the time, for proper “Due Diligence” and “Best Practices” in your overdraft protection program – especially when they have other responsibilities. If your staff is overworked or inexperienced in dealing with overdraft protection regulations and best practices, important issues may slip under your credit union's radar. Under today's rigid compliance standards and stiff enforcement penalties, such “oversights” may result in highly punitive consequences.

We strongly suggest that credit unions routinely undertake rigorous self-examination and evaluation of their overdraft protection programs, policies, training, and resources to determine those areas that may require legal, compliance, and operational improvement.


Many credit unions are reaching outside their institutions for compliance expertise and assistance. Trade associations; “common problem resolution” through peer groups or user groups; external legal counsel; seminars; webinars; teleconferences; and individual “boutique experts” now serve as resources for compliance information.

While such sources may be valuable resources to determine “WHAT” needs to be done, they are often inadequate with regard to the tactical specifics of “HOW, WHEN, AND WHERE.” Such recommendations are crucial in the establishment of a solid, platform of solutions to address compliance requirements.


At Strunk & Associates, our personnel and regulatory teams focus every day on the dynamics of regulatory forces that affect your credit union. This is why Strunk & Associates' clients are provided with the most comprehensive, reliably compliant, “HOW, WHEN, AND WHERE” solutions in the industry -- including fully compliant sample disclosures, procedures, policies and other required documentation and materials . We prepare our clients to meet today's regulatory requirements as well as establish a support system that prepares them for future regulatory challenges.

In business since 1976, Strunk & Associates, LP is a financial advisory service recognized nationally for its innovative design, development and implementation of The Original “Overdraft Privilege Service Program”. Strunk & Associates, LP currently has Overdraft Privilege Service Clients throughout the United States and the Caribbean .



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Jan. 8, 2007


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