Remember Citi's Overdraft Policy? It Wants to Make Sure You Do

Last year, Citigroup began processing check and automated clearing house transactions in order from the lowest dollar amount to the highest, a move that minimizes the potential for overdrafts. Today, it wants to make sure consumers — and perhaps regulators — haven't forgotten.

As part of its "Plain Talk About Your Products" initiative, Citi is making its overdraft policy part of a message about account transparency. To this end, it began distributing a two-page brochure last week in response to feedback from customers that they needed a clearer explanation of the value of their checking relationship.

Analysts suspect that consumers aren't the only audience for this new message.

"I think we're going to see more things like this, because it's indicative of what the CFPB is looking for," Aite Group senior analyst Madeline Aufseeser says. "It's what the regulators want, ultimately."

The Consumer Financial Protection Bureau could view the guide is a model for disclosure of financial products' policies, she says.

The Plain Talk brochure describes other Citi services, such as its tablet apps for the iPad and Kindle Fire, but the overdraft policy clarifications are the most important part, says Patricia Sahm, managing director at Auriemma Consulting Group.

"The federal regulators have been looking at the issue of overdraft caused by processing largest items to lowest items in terms of dollar amounts," she says. "If you're off by a dollar or two it can incur not just one but several overdraft charges. The regulators have said … 'We want to see more transparency on this.' "

Other banks responded to the pressure on their overdraft policies by ending their practice of handling transactions in high-to-low order and shifting to a model that handles them in chronological order. Citi goes a step further with its low-to-high model, and although it may be more consumer-friendly, this practice reduces the potential for fee revenue by making it harder consumers to incur overdrafts.

Further, Citi does not charge "continuous or extended" overdraft fees and it does not allow customers to opt in to point-of-sale overdraft protection for debit card transactions, it said in its announcement. Citi said it could not make an executive available to interview for this story by deadline.

Citi is also working with a smaller retail presence than rivals Wells Fargo, JPMorgan Chase and Bank of America, so the guides could be designed to boost the bank's brand, says Auriemma analyst Scott Strumello.

"They're playing from a little bit of a disadvantage in that they don't have branches on every street corner in every town across America," says Strumello. "This is one way to differentiate themselves."

Research indicates that younger consumers are no longer getting much guidance in basic financial management, such as how to balance a checkbook, so something like Plain Talk can be useful to them, he says.

Many banks have indicated that they are interested in providing more transparency, Sahm says.

The Plain Talk guide "comes out of a real desire to do research to drive the business — and it certainly doesn't hurt that it's a good story to be able tell your own customers and regulators and the general public," she says. "It could be a good pre-emptive move knowing that regulators are very interested in transparency."

Citi is making the two-page guides available at branches and online or by phone request. In addition to clarifying overdraft policies, the brochures emphasize standard features such as ATM access, online banking and bill payment, account alerts, budget management tools and mobile banking. The guides also describe fees for transactions such as money orders, foreign exchange, traveler's checks and wire transfers.