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 since the target keeps moving, there are still as many opinions as there are observers. Our teams continue to study, and in 2023 started a series of Conversations on ANR/NSF Fees events (now under the Conversations on Deposit Operations & Member Service group) 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?
• Go back to creating an overdraft protection LOC on every checking account?

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

CU*BASE has no such thing as an “APSN” fee. The trick with these is that there is no specific data in any of the transaction handling files that identify a transaction this way, which means CU*BASE has no reliable indicators on which to build any fee waiver functionality. However, if your credit union does not authorize based on ANR limits, you may be able to effectively eliminate APSN fees by simply deleting your debit card ANR fee, since with that configuration all transactions that are authorized, are authorized positive and therefore can’t charge a fee even if they have to be posted negative.

If your auditor asks you to identify these and analyze that fee activity, see if they can tell you exactly what they’re looking for.

Re-presented Items

Many years ago we researched how to identify checks and ACH items that are re-presented after being returned NSF.  At that time we did not have enough data to reliably identify these.

However, we recently found some new data elements on ACH items that are apparently being used more consistently now than before when a merchant re-presents a returned item. In most cases we are seeing the words “RETRY PYMT” (or something similar) within one of the extended transaction descriptions. However, this is still anything but a perfect process: we’re seeing typos like “RETYR” and “RETRR” as well, so unless we can identify every possible iteration and misspelling we might receive, some will likely still slip through the cracks.

(Interesting fact: Our research shows that PayPal originate five times as many of these retry items as any other merchant across our network.)

The Asterisk Intelligence team has created a Query that lists ACH retry transactions. Contact the AI team if you’d like a copy so that you can review and refund fees manually.

Status as of March 1, 2024:  Project #63119 has been submitted and is waiting for available programming resources.  This project will add a new option for ACH posting that will allow the CU to automatically waive any NSF/ANR/overdraft transfer fees for ACH debit items that are marked as “retry” by the merchant. In order to allow for an orderly rollout to credit unions, we will be adding a configuration flag that CUs can set if they wish to waive these fees. That will allow us to push the software to everyone with no change to existing processing, and CUs can activate the waiver when they are ready.

The most important thing to understand here is that we are completely at the mercy of outside merchants to code these re-presented items in a way we can catch in an automated fashion. We have analyzed enough transactions to have a pretty good idea of the most common ways these are being done. We’ll start with these findings and adjust over time as we see others that aren’t being caught. But no matter what we do, there will still be some that cannot be identified and will still slip through. We cannot warrant 100% success here.

Note: Our work is focused on ACH items. Since CUs can already handle re-presented share draft items manually, we will not be pursuing any changes to share draft processes at this time.

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
  This option was rejected after initial research showed it was incompatible with the way our infrastructure works with all vendors today.
• Simply use the “Used ANR/ODP” flag as is, and change all posting programs to charge only when ANR and/or ODP amounts were used to authorize an item
  A feasibility research project (#61023) has been completed, and our analysis shows this would require 820 hours of programming and testing effort. Given the investment required and the fact that the rules keep changing, senior management has elected not to proceed with this project at this time.  
• On ODP transfers, log a secondary transaction description that includes the available balance
  Project #61741 is currently waiting for an available QC tester.
• 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