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Discontinue an AOD Program after Several Years?

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Can a bank discontinue an AOD program after it's been in place for several years?

Certainly. There is no requirement that a bank leave its automated overdraft program in place solely due to its longevity. Like any other program, the AOD program might no longer fit the bank's strategic plan or it may present challenges the bank would prefer not to have to handle.

That said, it's important to plan the demise of the program carefully. There are likely to be significant numbers of depositors impacted by the bank's abandonment of the AOD program, and those customer should be notified of the bank's plan to change how overdrafts are handled. Although it's true that the bank's payment of overdrawn items remained discretionary under the automated program, it produced patterns of paid/unpaid items that could be considered predictable.

Changing to a discretionary program is likely to result in a lot fewer paid items and a lot more that are returned unpaid. Even though the affected customers may ultimately benefit (through more careful management of their accounts) from the change, the immediate impact could be upsetting and result in third-party charges for returned checks.

For some customers, the impact of your plan could be similar to "going cold turkey" after years of nicotine addiction. Part of your challenge might be crafting your notice in such a way as to convince them it's a positive change. It could be a creative challenge for your marketing department.

First published on 06/09/2014

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