"The required communication too often lacks clarity," Marous said. "Consumers do not understand whether to opt in or opt out."

Marous offered his perspective on how banks can best inform and educate consumers about the Regulation E changes, which become mandatory beginning in July, during a March 4 teleconference entitled “Effectively Communicating Reg. E Options” hosted by Tampa-based OnsiteConference Inc.

“I don’t remember a time when regulation has captivated so much interest and dominated resources as much as Regulation E,” Marous said. “What’s most amazing is there’s no place in the bank that isn’t impacted by Reg E – from operations to marketing and sales, to product innovation.”

The new regulation requires banks to obtain the customer’s permission to enroll them in overdraft programs, which charge fees when they over-spend their account. While the communication of this new rule must be segregated from other bank messages, such as unrelated marketing materials or account statements, Marous pointed out that bankers can take advantage of the opportunity to enhance business with their existing customers – if they handle it correctly.

Whether those communications travel via mail, telephone, email or through Web sites, Marous said banks can offer alternatives to overdraft. These would include new products or restructured relationships based on the customer’s savings habits, channel usage and range of accounts, he said.

As an example of an alternative product, Marous cited Birmingham, Ala.-based Compass Bancshares Inc., whose Build-to-Order Free Checking account enables customers to customize their own features. He said this product gives customers an alternative to overdraft and yet fosters use of a wider use of bank products.

Banks could also link savings, home equity or other credit accounts to checking, depending on that customer’s product usage and potential need for overdraft coverage, Marous said. He stressed the need for an on-going communication, both about other product alternatives and the continued availability of overdraft programs – especially for those customers who do not choose to opt in, but still tend to over-spend their account.

Budgeting for all aspects of this massive and multi-pronged communication effort is a critical consideration as well. Marous said that among the dozens of bankers he has talked to, “they all knew about Regulation E, but not one bank had dollars budgeted from a communication or human resources standpoint.”

“Banks need to allocate resources to communicate on the front end and on an on-going basis as overdrafts occur,” he added.

Marous suggested that banks should start the communication process with employees, making sure that they are completely in tune with the new regulations, the opt-in process, and the options that can be suggested to customers. Aside from the typical brochures and direct mail, this information should also be conveyed prominently to various customer segments through Web pages on the bank’s site, ATM messaging and potentially as part of the call center representative’s script, he added.

“Banks need to use all the channels they have available, not just direct mail,” Marous said. “Those banks using email and direct mail are getting better results than with either channel by itself.”

He also advised bankers to be careful about appearing to scare customers into opting in, suggesting they need to fashion their terminology to be straightforward and customer-friendly within the scope of conveying the new rules.

(For more on bank efforts to communicate Reg E changes to their customers, see “Overcoming the Overdraft Stigma” in the February 1, 2010 issue of BAI Banking Strategies. Also see, “New Overdraft Rule May Require System Changes” in the January 13, 2010 issue of BAI Banking Strategies Retail Delivery Insights.)