By: Joe Gillen
Overdraft protection programs are in high demand by some consumers. The weak economy and stunted job market have impacted Americans of all income levels, and many turn to overdraft privilege programs as a short-term solution when they fall short on funds. However, the Consumer Financial Protection Bureau has relied on outdated information from the Federal Insurance Deposit Corp. to launch an assault against overdraft programs.
Community banks and credit unions have taken a stand against the federal agency's suggested reforms that would limit Americans' short-term financing options and the ability to make their own financial choices.
The National Association of Federal Credit Unions recently appealed to the CFPB, noting their commitment to providing quality services to members. The group said that they are devoted to providing more value and no additional changes to their overdraft protection programs are needed.
"Overdraft protection is a useful service for some consumers, and those who use it understand the product and do not need still more disclosures warning about its perceived flaws," said Fred Becker, NAFCU president and CEO. "Credit unions already tailor their programs to meet their members' needs. There is no one-size-fits-all approach to overdraft protection."
The group reaffirmed the many smart and responsible practices that credit unions employ to ensure their members are not abusing the program. Not only do credit unions monitor overdraft activity and work with members to find alternative financing solutions, but they also provide financial education programs to help members manage their finances. Further, there is a clear divide between how large financial institutions manage their programs and the more consumer-friendly credit union programs.
"Credit unions are not-for-profit financial cooperatives owned by their members, and consequently, credit unions do not possess the same motive that some other institutions have, to drive profits through this sort of fee income," the NAFCU wrote to the CFPB.
Furthermore, the NAFCU released the results of a recent survey demonstrating that their programs are not only flexible, but also the preferred method of alternative financing. Ninety percent of credit unions in the survey said they post transactions chronologically, which gives members more control and insight into their balances. In addition, 97.9 percent say they often reverse overdraft charges on a case-by-case basis.