ABiz.coverWednesday, March 30, 2011

MidSouth Bank’s program to help habitual overdrafters is country’s first.
By Heather Miller

It’s the day before your paycheck hits the bank, and you log in to your online banking service to examine your lunch options. Before you can decide whether it’s a day of fine dining or a drive thru dollar menu, the screen brings a bothersome knot to the pit of your stomach: The numbers just don’t add up.

The negative account balance staring back at you could be caused by a number of factors, such as a double deduction from a company you’ve recently done business with (yes, it just happened to me at a downtown bar, so check your statement!) — or a simple accounting error on your part. Either way, the overdraft fees have left your stomach empty and your head spinning. What to do?
For MidSouth Bank customers, the answer is a phone call away.

The latest initiative from Lafayette-based MidSouth Bank to reduce excessive overdraft fees incurred by its customers is being touted as the first of its kind and has the rest of the nation’s banking industry taking notice. It’s yet another example of the community bank’s ongoing practice of good old fashioned relationship banking.

The new ombudsman program is adding the title of “account analysis counselor” to two MidSouth employees, who may provide a wide range of services including monitoring accounts and intervening on habitual overdrafters — or people who overdraw from their accounts more than six times in a 12-month period.

“It’s just a continual effort to reach out to customers more and more,” says MidSouth President and CEO Rusty Cloutier. “We know how tough the economic situation has been, customers having credit problems and problems balancing their checkbook. We want them to know they’re not all alone and by themselves. We want them to be comfortable talking to the bank and to know we’re open to helping them.”

Although the FDIC cannot comment on individual banks and their programs, FDIC overdraft guidance approved in November 2010 is aligned with MidSouth’s new program — and the federal agency is recommending all banks implement similar practices by July.

“The FDIC expects institutions to employ measured and appropriate follow-up with customers ... contacting the customer to discuss less costly alternatives ... consistent with safe and sound banking practices ... and giving the customer a reasonable opportunity to decide whether to continue fee-based overdraft coverage or choose another available alternative,” the report states.

According to that same report, industry leaders have raised several arguments about the new overdraft guidance, particularly screaming that the “regulatory burden” could trigger abuse and excessive use of overdrafts and arguing that counseling and helping customers opt for the best services are not in the job descriptions of banking institutions.

The FDIC countered in its report that most consumers who submitted public comments, as well as public advocacy groups, supported the additional guidelines and new consumer-oriented initiatives from banks.

In a March 23 speech to the Independent Community Bankers of America, for which Cloutier served as a past chairman, Acting Comptroller of the Currency John Walsh told the association that “income generated by overdraft protection programs is also coming under increasing scrutiny.”

“The bottom line here is that community banks that have encouraged customers to become overly reliant on this product to manage their cash flow will need to find other sources of revenue to offset an almost certain decline in the income they have been generating from overdraft protection fees,” Walsh says.

“Our program was a big subject of discussion at the ICBA convention,” Cloutier says.

But the effort to ease overdraft concerns is not the first time MidSouth has gone beyond the regulatory call of duty, Cloutier says. In the aftermath of south Louisiana’s devastating hurricanes and as recently as the BP Gulf oil spill, Cloutier says the mantra of superior customer service has never changed.

“That’s our job,” Cloutier says. “We’re not off in some foreign land. Our managers are there every day working with them. We had a lot of that during the BP disaster, working with those people who were somewhat distraught. This is a more formalized basis to continue it forever within the bank.”

Woody Briggs, managing director for Chaffe and Associates of New Orleans, an investment banking firm, says new consumer programs are a cyclical game when it comes to banks and regulators, often dependent on the financial environment and its constant ups and downs.

“These programs have popped up and gone away and popped up and gone away; the regulators encourage you to do it,” Briggs says. “Rusty’s always got his ear to the ground, nose to the grindstone and his eye on the ball. It’s probably good marketing. He knows good relations with his customers; that’s just an example of that belief.”

[Editor’s Note: MidSouth Bank COO Jerry Reaux is chairman of the board for the Independent Weekly Publishing Group, ABiz’s parent company.]

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