Actions to severely limit the availability of overdraft services could force consumers away from reputable, regulated financial institutions, CUNA wrote a House Financial Services subcommittee Wednesday. The committee will conduct a hearing on overdraft fees Thursday, featuring testimony from UW Credit Union President/CEO Paul Kundert.

"We strongly object to legislation, regulation and other government intervention that restricts the ability of credit unions to offer overdraft protection plans that help members resolve short-term financial difficulties," CUNA's letter reads. 

“In accordance with all relevant laws and regulations, a consumer that uses overdraft protection has affirmatively opted-in to the service as part of their account agreement,” it adds. “Credit unions offer overdraft programs as a convenience and accommodation to a members’ benefit, and members that choose to opt-in often do so for the peace-of-mind these services provide. In some cases, the opt-in decision was made precisely for the comfort of knowing that transactions would continue to be processed during an unexpected financial emergency or other cash shortfall.”

The letter notes that—since credit unions specifically design overdraft programs with members in mind—there is substantial diversity in such programs. Many credit unions link accounts, provide overdraft lines of credit, and offer other services intended to help members avoid future or frequent overdraft use.

Credit unions also have a track record of establishing policies and procedures aimed as assisting members who frequently use overdraft protection.

“We believe effectively shutting down overdraft services would unnecessarily limit credit unions’ ability to assist their members and is ill-advised,” the letter reads. “Rather, the best and least disruptive path forward would be to continue permitting transactions to be processed and encouraging affected consumers to reach out to and work with their local credit union to reduce or eliminate any fees or to consider other low-cost products and services.

Kundert will share his credit union’s experiences regarding overdraft protection programs and the decision to reduce overdraft fees. He also notes that any policy approaches to overdraft services should account for credit unions’ ability to provide members short-term credit.

“Care should be taken in considering regulatory or legislative approaches that would reduce the availability of short-term consumer liquidity,” Kundert said in written testimony provided to the committee.