Watch how you market those overdraft programs.

• Author: Pry, Carl G.
• Position: MARKETING COMPLIANCE

THE REGULATORS are looking at various practices as unfair or deceptive, and the Dodd-Frank Act has added the word "abusive" to the mix. This occurs when a bank takes advantage of a consumer's lack of understanding of the risks or costs of a product or service. The newly created Bureau of Consumer Financial Protection, as the agency in charge of writing new rules in this area, has already signaled a few areas that will be ripe for regulation, and one in particular is overdraft programs.

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New regulations became effective in July requiring consumers to opt in to banks' programs to pay overdrafts on ATM and debit card transactions. Regulatory "guidance" has also been issued by the FDIC and OTS regarding overdraft practices. Although not binding (yet), the guidance shows the regulators' opinions on certain practices and should be heeded when crafting your overdraft promotional efforts. Failure to comply may result in a UDAP criticism by your examiners.

Ever since the final rules were announced, banks have been trying to figure out ways to convince customers to sign up for the service, with varying degrees of success. What we've seen in the last few months, though, are situations where banks with very high opt-in rates being scrutinized by their regulators, to see if marketing of the service went too far. And in some cases, in their opinion, it has.

So what should you watch for? What should you do (or not do) when advertising overdraft programs to your customers? Here are a few tips:

* Provide choices and "better options" to consumers. Your overdraft protection program isn't the only game in town; make sure customers understand that. If overdrafts could be covered by a different mechanism (such as a linked savings account, for example), make sure...