Studying ANR/NSF fees

For about the last year or so we’ve been watching the buzz around so-called “junk fees” being charged to members. Every few months the buzz shifts to some new nuance. To say this is a moving target is an understatement.

As always, we look to our clients to guide us as to what they need and how the CUSO should invest. But given the target keeps moving, there are still as many opinions as there are observers. Our teams continue to study, and in January of 2023 had our first Conversations on ANR/NSF Fees event to brainstorm with credit union experts.

View slides from Conversations on ANR/NSF Fees (August 29, 2023)

View slides from Conversations on ANR/NSF Fees (January 10, 2023)

Ideas people are tossing around:

• Database changes to identify ANR vs. ODP used in authorizations? (currently there’s just one flag that is used for either/both – see “Other research we’ve done” below for more)
• Disclose to member via push notifications when ANR limits were used?
• More balance details stored in hold records?
• Wait to charge fees (daily monitoring vs. real-time)?
• More granularity for NSF fee options?
• Eliminate interactive fees altogether and charge club dues or other monthly fees that include overdraft services instead?

So what is a “junk fee” anyway?

The two biggest buzzes this summer have been fees for APSN (authorize positive, settle negative) debit card items, as well as fees for a check or ACH item that’s returned NSF but then gets presented again later on by the merchant.

ASPN

As to APSN items, if your auditor asks you to identify these, see if they can tell you exactly what they’re looking for. CU*BASE has no such thing as an “APSN” fee. So how do we identify how your credit union handles these, and more importantly, do so consistently enough to analyze them in bulk?

This might depend on how good your data governance and procedures are. For example, when your MSRs post refunds, do they all use the same description so the items can actually be located and analyzed? CU*BASE Tool #906 Update NSF Stats/Reg DD Fees can be used to study your fee activity. But when your MSRs post refunds, are they instructed to adjust these stats as well?

Re-presented items

Many years ago we researched how to identify checks or ACH items that are re-presented after being returned NSF. Unfortunately, in the vast majority of cases we do not have enough information to reliably identify these. They don’t come in any differently than a regular item, and it can even vary based on the merchant. It’s not uncommon for different items to come in for the same amount, so it’s hard for the system to reliably make a guess. To date we believe it is not feasible to automate this process in a way that doesn’t cause more problems than it solves.

One idea that’s been bouncing around: What if there was a dashboard that could help you manually look for these items to decide whether to a refund might be needed? What types of data would you want to see, and what filters would help? If we can’t do it automatically, can we help make the manual process any easier?

Other research we’ve done

Following our conversations in January, we’ve initiated some specific research projects on a few of the more popular ideas. Here’s a recap of some of these ideas:

• Separate the “Used ANR/ODP” flag on debit card transactions into two separate flags, then change posting programs to charge only when the ANR limit is used to authorize an item
  A feasibility research project (#62023) is still in process, but preliminary analysis shows this would not be a trivial undertaking and could potentially require independent changes (and potential certification) with all EFT vendors.
• On ODP transfers, log a secondary transaction description that includes the available balance
  Project #61741 was submitted on July 10; waiting for available programming resources.
• Add new fee options for NSF, similar to ANR (non-fee tolerance, daily cap, and fees by origin)
  When we added the daily cap for ANR fees it required 700 programming hours plus QC testing. When we separated fees by origin code for ANR fees, the number was 1,200 hours. The non-fee tolerance change would likely to fall somewhere in the middle. And given that you’d still be charging fees, this investment might not give enough bang for the buck.

What can you do now?

• Make sure you understand exactly what your fee practices are. Review your configs, yes, but also your day-to-day procedures. Are you applying your rules consistently across the board?
• Make sure your disclosures match what you do! Some of the folks we’ve talked to who’ve run into snags find that adjustments to their disclosures were the only change they needed to make.
• Start thinking about new sources of fee or service income now. Even if you keep some form of ANR/NSF fee program, what if that income becomes a much smaller piece of the pie in the future?

Looking for new sources of income? Contact Earnings Edge for existing CU*BASE tools that might help!

Chefs for this recipe:  Keegan Daniel, Jim Vilker, Dawn Moore