Despite the Consumer Financial Protection Bureau (CFPB) labeling courtesy pay/overdraft protection programs as “junk fees,” some of the biggest proponents of these services are members, finance leaders say.
“Our members are low income, and they depend on overdraft protection,” says Mira Ness, president/CEO at $71 million asset New York University Federal Credit Union. She participated in a panel discussion about the future of noninterest income Tuesday at the 2023 CUNA Finance Council Conference.
Members who overuse overdraft protection must attend a financial education session or meet with a financial counselor, Ness says. The credit union also offers a quick-cash loan of $500 for members who find themselves in a tough spot. The loan has a 0% interest rate with a $25 application fee.
“Ultimately, we’re here because members need us,” she says. “Be clear about why you’re charging a fee, and offer help.”
The perception that only struggling members use courtesy pay isn’t true, says Paul Jockisch, chief financial officer (CFO) at $4 billion asset Stanford Federal Credit Union in Palo Alto, Calif.
“Our members expect it,” he says. “Be transparent about how you talk about it, and be transparent with your fees. It has to be understandable.”
Stanford Federal continues to tweak its courtesy pay program, and is considering different options, including a subscription model that allows members to overdraft up to a certain amount before being charged, Jockisch says.
It all depends on how you present your program, he says, citing one institution’s “Spot you” program, through which they spot customers month.
Brett Fisher, senior vice president of finance at $1.2 billion asset Skyla Credit Union in Charlotte, N.C., agrees.
“It’s a matter of perception. Our overdraft protection program isn’t consistent with CFPB’s stance that they’re junk fees,” he says. “We offer it as a value-add service, and we see a lot of high-income people using it. They suck at budgeting.”
Panelists highlighted several creative ways they generate noninterest income: