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PCBB Banc Investment Daily June 19, 2013
Banc Investment Daily
June 19, 2013

Bring Your Sunscreen

Summer has arrived and if you haven't bought sunscreen since last summer, you will be in for a surprise with the new labeling. The FDA has instituted some new rules primarily around what manufacturers of sunscreen can claim about their products. There are newly established standards for testing the effectiveness of sunscreen products and the labeling is required to accurately reflect those test results. New labeling will not allow an SPF rating over 50, though a product can claim SPF 50+. There is also no such thing as sun "block" anymore. Manufacturers can no longer say a product is waterproof either, only water resistant. In addition, water-resistant sunscreens must specify frequency of reapplication necessary for protection (the only choices are 40 or 80 minutes). The new standardized labeling will be helpful, but also as always with regulations, it will be more complex until consumers learn what to look for.
Another area closer to home that bankers are adapting to is the complex set of communications / disclosures banks must provide for checking accounts. The Pew Charitable Trust recently did a study ranking checking account disclosures of terms, fees, overdrafts and dispute resolution practices. Some customers may be interested in this information, but the study found the pages and pages presented at account opening are virtually impossible to understand. This led 78% of those surveyed to say they would banks to provide a one-page summary of the terms, conditions and fees for checking accounts.
The Pew study was undertaken in late 2012 and centered around the 50 largest banks based on domestic deposit volume. Of those, 36 banks provided information and those comprise 56% of domestic deposit volume. Bank documents were graded on effectiveness in providing concise and clear disclosures about cost and terms, effectiveness in reducing the incidence of overdrafts, eliminating practices that maximize overdraft fees, and finally offering customers a meaningful choice to resolve problems other than binding arbitration.
None of the banks in the study demonstrated best practices or even good practices in all categories. However, 97% did achieve a top grade in at least one area, but even the highest scoring institutions did not perform well in every category. As a result of the study, Pew advocates institutions should strive to summarize information in a concise uniform format, provide account holders with information on all available overdraft options, make overdraft penalties reflect the institution's costs in providing the overdraft loan and finally prohibit mandatory binding arbitration clauses.
Community banks may ask, well that's just measuring the big guys, so how does it apply to me? Given the industry, most likely the information your bank gives checking account customers doesn't look very different. As you seek to differentiate yourself by providing customer-centric service, even if it's not required, knowing that many customers would like to see a one-page summary might be worth creating and delivering (after checking with your legal team of course). You might do this because it is probably going there anyway and because customers that understand the services they use, are more likely to be satisfied than if they don't understand.
Just like knowing it is necessary to reapply water resistant sunscreen every 40 minutes, people would rather know that and
either disregard the information or follow directions. Nearly all will still buy the sunscreen just as they have before. Enjoy summer.