Overdraft Protection Plans Getting A Closer Look

CUs have a tradition of offering their members free or low-fee products and services.

May 27, 2013

Credit unions have had a long tradition of offering their members free or low-fee products and services.

Credit unions consistently offer lower and fewer fees than their bank competitors, and they structure overdraft protection programs in members’ best interests. The CUNA 2013-2014 Fees Report shows these credit union practices continue, and credit unions’ fees continue to compare favorably with banks.
While it has always been important for credit unions to maintain their competitive fee advantage and member-friendly overdraftprotection programs, recent events in Congress have made it even more so.
In late March, Reps. Carolyn Maloney, D-N.Y., and Maxine Waters, D-Calif., introduced the Overdraft Protection Act of 2013, which would place a cap on overdraft fees, limit the number of overdrafts a member could use per year, and require financial institutions to post credits and debits in a particular order.
Overdraft protection plans that are reasonably structured can help ensure consumers will have access to funds when needed. “CUNA supports the ability of credit unions to offer these plans as a way to help their members resolve short-term financial problems,” says CUNA President/CEO Bill Cheney.
In addition to the bill, the Consumer Financial Protection Bureau has been examining overdraft issues and the order in which institutions pay items from a consumer’s checking account. CUNA staff have been reminding policymakers that reasonable overdraft protection plans help ensure that consumers have access to their funds when they need them.
CUNA historically has had concerns with legislative and regulatory proposals that make it more difficult for credit unions to offer these services to their members. “We believe these decisions are best made by credit unions’ democratically elected boards, not by Congress or the regulator,” Cheney says.