Raining Pennies From Overdrafts at Coastal
On Sunday Aug. 15 Coastal Federal Credit Union in Raleigh, N.C., implemented its own new overdraft protection rule.
The date signified the deadline for the new Reg E requirements for financial institutions to require existing customers to opt in to overdraft protection for debit card and ATM transactions. In response to the new regulation Coastal Federal started a new overdraft forgiveness program, which charges members one penny per overdraft.
Instead of the usual $28 overdraft fee, members will be charged only one cent provided the member either corrects the overdraft before 11 pm the same day or if the overdraft did not take the account balance into the negative by more than $10.
Marketing Communications Manager Joe Mecca said the idea stemmed from member focus groups the credit union conducted leading up to the regulation changes.
"We asked members about their overdraft habits, and one of the things that came out of the groups was that sometimes members make mistakes and they felt they shouldn't be charged a large fee if they fix the mistake or if it is a small mistake. And we agreed," he said.
The new policy also helps the credit union streamline the overdraft fee reversal process, Mecca said, as it will reduce the number of calls employees have to field from members wanting to reverse overdraft fees.
"We listened to our members and saw that there was something that we could do about the problem," Mecca said. "They shouldn't be charged a big fee for those types of transactions."
The current program is designed to benefit members that actively check their account balance. The credit union's e-mail alert system runs each morning so the member would not be notified with an alert until the morning after the overdraft has occurred. Mecca said the credit union is working to implement real-time alerts for the future, but as of right now, the penny charge works as a way to notify members that are actively checking their account.
Coastal branches operate from 7 a.m. until 7 p.m. on weekdays and 9 a.m. until 2 p.m. on Saturdays. In-branch transactions and transfers completed using online banking prior to 11 p.m. are credited to the member's account that same day.
As the opt-in deadline neared, credit unions put together plans to increase the amount of members that opt in for overdraft protection. Mecca said that the credit union also hopes that the new forgiveness program will help sway members that were unsure of their decision to opt in.
"We thought it would be good for anyone on the fence deciding if they really need the service," Mecca said. "This way it is there at a low cost if they do happen to need it at one point."
When the new service was announced on Aug. 13, Mecca said it generated interest from other credit unions and from the local media. The local daily paper ran a story on the service, and Mecca said his Twitter page was inundated with comments and questions after he released the announcement. To make up for the loss in fee income, the credit union hopes the attention generated by the program will help bring in new checking accounts.
"We hope to make up for what we will lose on fee income in new business. This is a huge differentiating factor between our checking account and what other financial institutions offer," Mecca firstname.lastname@example.org