Bank of America makes the first move

As everyone in the financial services industry, and many consumers are now aware, Bank of America announced they are ending overdraft fees on Debit Card transactions beginning this summer. You know it's a big deal when the story makes it to the Today Show. This is their answer to the recent Regulation E changes enacted by the Federal Reserve that take place later this year.

On the surface, this appears to be a consumer friendly solution from a bank that has been battered in the public relations arena. They've taken a lot of heat (often unfairly) for the bank bailout and the mortgage crisis. They really need something to repair their image.

Our bank, on the other hand, is taking a different approach. We see this as an opportunity to both educate consumers and allow them to make the decision, not us. For more information, take a look at this post on our bank's web site. As always, I'd love to hear your thoughts.

How Not to Lose a Customer

Reg E changes. The term sends shivers down the backs of bankers all over the country. For those who aren't familiar with the changes, effective August 15, the Federal Reserve revised Regulation E to address checking account overdraft fees on certain consumer transactions. The final rule limits the ability of financial institutions to assess an overdraft fee unless a customer agrees, in writing, to the overdraft service. The consumer will be asked to either "opt in" or "opt out" of the service. If they don't respond by the effective date, they will automatically be opted out.

While this seems like a very consumer friendly act, it could very easily turn into a major issue for our customers. Many banks provided customers with a form of overdraft courtesy, essentially allowing customers to overdraw their account, pay the transaction, and charge a fee. While it is often abused by some, it can also prevent those occasions, like at the grocery store, where having your purchase declined would be really embarrassing. It's going to be pretty difficult to explain to a customer as they are closing their account because you "did this to them".

So it is incumbent on us to educate our customers before this goes into effect. But there's the real challenge. How do you explain the impact when they weren't even aware of this unadvertised, behind the scenes service? Bottom line is, for the sake of our customer's, we better figure it out.