I believe until customers fully understand the repercussions of not having overdraft services, businesses will experience a sudden and unexpected increase in denied debit card transactions because the Regulation E revision applies to every customer of every U.S. bank and credit union that offers overdraft services for consumer accounts with debit card or ATM card access.

On the surface, this issue seems to only impact the customer and their bank, but, anyone who provides services which cannot be returned or voided, such as restaurant owners and service providers, or any business person who may not collect their fee until after the service is rendered, is in a position to experience this unintended consequence of the revision to Regulation E.

For accounts opened prior to July 1, 2010, most bank customers (and remember, I’m talking about all banks, not just OmniAmerican), this restriction will go into effect on August 15; however, it is immediately effective for a consumer account opened on or after July 1. This means your business may start seeing a slight increase in denied debit card transactions in July; however, the greatest impact will be seen in mid-to-late August.

The majority of banks throughout the nation have been working diligently to educate their customers about what it means to Opt-in or Opt-out of overdraft services. I believe when the regulatory revision goes into full effect on August 15, there will still be many confused customers who will not understand why their transactions have been declined, especially if it’s only for a small amount.

The good news is that there’s a way you can help prevent your business and your customers from finding themselves in this very awkward situation: tell your customers to contact their financial institution about debit card overdraft services and their options for covering overdrafts. Remember, this is a federally mandated change and applies to every bank and credit union that offers overdraft services.

Here’s some other things you can do to help keep transactions flowing through your business:

• Educate employees – Educate your employees about the change so they can offer an explanation to a customer why a debit transaction may have been declined. Since this revision is just now taking effect, especially customers who may have never experienced a denial may be very surprised to have their transactions denied. Of course, there may other reasons a transaction could be declined (exceeding an overdraft limit, for example). The goal should not be to turn your employees into bankers, providing a litany of reasons a charge may not have been approved. After all, the answer to “why” a transaction is denied may not always be based on overdraft services. A wealth of information is available from your financial institution or online at the Federal Reserve Board Web site.
• Educate customers –Tell your regular customers about the impact of the revisions to Regulation E and clarify your business policy regarding denied transactions. Use a simple phrase such as, “I noticed you used your check card for this purchase. I’ve been following the changes in banking regulations and suggesting my customers investigate their bank’s overdraft services.”
• Encourage customers to contact their financial institution – When a transaction is declined, your employees should immediately advise the customer to contact their financial institution, but your employee will not necessarily know why the transaction was declined at that moment.
• Establish a policy for handling denied transactions – Having a transaction refused at the cash register is a highly embarrassing experience for both you and your customer. You can alleviate the pressure on employees to deal with this awkward situation by creating step-by-step procedures for them to follow. Explain to employees the importance of maintaining a customer’s privacy, to use discretion in explaining the situation to the customer and how to respectfully explore other forms of payment options. If you do not have a current policy, contact your bank’s commercial services representative for help in creating one.
• Recurring debit card transactions are not affected – Transactions such as a fitness club membership or other charges debited directly from a checking account are not part of Regulation E changes governing overdraft services. If your business processes recurring payments, ensure these transactions are properly coded to reduce the frequency of declined debit card transactions.

A small number of customers may not understand these changes and express anger if their transaction is denied. Naturally, most of this anger will be temporary and, in the end, these customers will care more about how the issue was handled than about the individual situation. You can turn this negative experience into an opportunity to build a long-term customer relationship, and perhaps create a new business referral resource, if you and your employees treat the customer with respect and show discretion when dealing with this embarrassing issue.

Some strategies to help you and your employees turn an angry customer in a long-term customer include:

• Be a good listener – In this situation, the customer is probably discomforted their transaction was declined and they want to express their frustration. The best thing to do is give the customer a chance to get it off their chest and listen to what they have to say.
• Empathize – Angry customers often just want to know you understand they are uncomfortable in the situation, regardless of who is at fault. Think about what you would want from your company if you were in the customer’s shoes. Express some empathy and consider an apology for the situation in which they find themselves.
• Try to find a mutually beneficial solution – Although there is little you can do about the transaction being declined, you can work with the customer to try and find another solution. Take a moment to help the customer think through the Options. Can they make a cash payment or put the purchase on a credit card? Perhaps you may offer to delay payment to a future date in order to allow the customer an opportunity to transfer funds into the account or secure another method of payment.
• Don’t take it personally – The customer is angry at the situation, not at your business. Taking their anger personally will only make the issue worse and will ensure you permanently lose a customer (and a possible referral source).
• Remain calm – Responding to an angry customer by returning their anger will only escalate the situation. If voices are raised or the customer starts to create a scene, don’t return the behavior. Stay calm and invite the customer to step away to a private space so the problem may be discussed without further embarrassment or the distraction of curious onlookers.

Although the consequences are not intentional, Regulation E revisions can impact the bottom line for your business and has the potential to damage some customer relationships. By working with your customers and employees in advance and proactively implementing a plan to deal with a larger number of declined debit transactions, you can use this federally mandated regulatory change to gain customer confidence and increase your referral sources.

If there are insufficient funds in a consumer account when a recurring transaction is processed, the bank may still cover the transaction, up to a certain amount, based on the current arrangement for overdraft protection or overdraft services.

Never hesitate to seek the advice of your favorite banker, who can provide the necessary insight and recommendations to help you to determine the best options for you.

More information about Regulation E and Opting-in is also available on our special Web site www.OmniForMeRewards.com/Optin .