By: Joe Gillen
The Credit Union National Association cited consumer demand for overdraft protection programs in their appeal to the Consumer Financial Protection Bureau to avoid over-regulation of these services.
Millions of consumers seek comfort in the knowledge that overdraft programs will keep them protected from credit score damage and additional penalties if they fall short on funds to make a mortgage payment or utility bill. CUNA noted that in a survey of 543 credit unions, nearly 80 percent said half of their members or more have enrolled in an overdraft program.
"Credit unions offer overdraft programs as a convenience and accommodation for their members and have indicated many members appreciate these services," CUNA wrote. "As the Bureau considers what next steps it might take regarding overdraft programs, we urge the agency to take into consideration the importance of overdraft programs to consumers who do not want to be embarrassed at the point of sale and want the comfort of knowing a purchase or transaction, such as a mortgage payment, will be honored."
Credit unions also cited significantly more affordability for overdraft services compared to the country's largest banks. A 2012 Pew Trust study conducted in June revealed the country's 12 largest credit unions charged an average of $5 per transaction to transfer funds from deposit accounts, compared with an average of $12 from the country's 12 largest banks. In addition, the same 12 credit unions also charged three-quarters less than the top 12 largest banks when it comes to courtesy pay services.
CUNA also differentiated itself from megabanks by noting that the very core of its structure is designed to support its members and keep fees low.
"Credit unions are member-owned, not-for-profit financial cooperatives that operate for the purpose of promoting thrift, providing credit at competitive rates, and providing other financial services to their member-owners," CUNA explained. "As the only consumer owned cooperatives in the financial marketplace, credit unions have a tradition of protecting consumer interests, and CUNA has consistently been a strong proponent of appropriate and sufficient safeguards and disclosures for consumer financial products and services, including those that relate to deposit accounts."
The CFPB has been openly accepting feedback on overdraft regulations from all financial institutions. However, proposed legislation has demonstrated that the federal regulator has failed to take the overdraft program differences between smaller institutions and megabanks into account.