Prompted by Regulator Concern, Symitar Advises Clients on Overdraft Ordering
Regulators are concerned financial institutions may be re-ordering the posting of transactions to maximize overdraft income, according to an email from Symitar to customers obtained on Tuesday by Credit Union Times.
“Recently, we have learned that regulators have voiced some concerns about the policies and procedures of some financial institutions regarding overdraft fees. Regulators seem to be concerned that some financial institutions may be re-ordering the posting of transactions to maximize the number of overdraft fees they can charge,” the email said.
Credit unions on the widely used Episys core processing platform that claim to post share drafts in the order they are received are wrong, according to the email.
“Currently, the Episys Draft Posting batch program does not allow the draft items to post in the order they are received,” the email said.
Instead, the Episys software draft posting program allows credit unions to select from three processing methods: low to high amount, high to low amount, and draft number order.
ACH posting follows NACHA settlement rules, posting ACH items first by settlement date, then credit items and debit items, from lowest to highest amount.
“Using the Exception Item Manager program for Draft Posting and ACH Posting allows you to move exception items back to their applicable programs to post later if additional credits are received that will cover the items. You can use this feature in Episys as many times as you like before the account is overdrawn,” the email said.
In the Episys online card environment, the ATM software posts transactions in real time, as it receives them. The program does not have the ability to re-sort or post high to low order, the email said.
The Consumer Financial Protection Bureau has been collecting comments regarding overdraft programs, in anticipation of new regulations the bureau may release.
Eight credit unions have been slapped with class-action lawsuits alleging they reordered transaction processing in an effort to maximize overdraft income. Of the eight, three operate on the Episys core system: the $9.4 billion SchoolsFirst FCU of Santa Ana, Calif., the $8.4 billion Alliant CU of Chicago and the $590 million Alabama Telco CU of Hoover, Ala.