NSF Fee Cap Proposal Will Help Preserve What CUs are all About
Because of several negative comments I received regarding my Letter to the Editor published in the Oct. 12 issue, please allow me to add some follow-up discussion points on the NSF Fee Cap proposal, which is not totally without merit as some readers suggested. I grew up in a home of five children where frequently there were more kids than money. Not uncommon for the times, my parents wrote many checks against non-sufficient funds. There was no dishonesty and the checks were always - eventually - made good. Today, millions of CU members are in a similar situation. The current unregulated NSF fees create additional financial burden on an already stretched family budget. Credit unions are failing, often abusing, this critical segment of our membership. The $7 difference between the current CU industry average of $22.50 and my proposed NSF fee cap of three times the federal minimum wage will make a substantial difference to the millions of CU members that lack the financial resources or education to avoid NSFs. It is not uncommon for members in the NSF-cycle to write four or five NSFs per month. The proposal provides a fee savings of $400 to $600 after-tax dollars a year to these members "of small means," to use language from the Federal Credit Union Act. The NSF fee cap would let the industry demonstrate why it is tax-exempt. The tax-exemption is not simply tied to our co-operative form of organization. Most co-ops pay federal income tax. Congress granted credit unions the tax-exemption based on the expectation that CUs would fulfill a social mission of providing members with low-cost financial services. Credit unions charging $22 for a $2 service disrespect Congress' tax-exemption and at the same time support the bankers' claims that credit unions are acting like banks. Why regulate? Why not let the free market set the NSF rate? I answer those questions with a question. When is the last time a financial institution advertised NSF fees? As Greg McBride of Bankrate.com accurately stated in USA Today, Oct 4, 2005, "No one is going to advertise low bounced check fees". The free market is not working because consumers do not price-shop NSF fees. Regulatory intervention is often justified when the free market does not work as is the case with NSF fees. Today, credit unions representing 40% of this member-owned, not-for-profit industry's assets subscribe to a nationally-known financial strategist that strongly advocates more and more fee income. As an invited guest to one of the strategist's meetings, I learned first hand how to "trick" (the presenter's word) members into investing in 13-month certificates so that member funds can be rolled into lower-rate 12-month certificates upon maturity. When competing with the for-profit banking sector credit unions increasingly forego what's in the best interest of the membership. Why doesn't the industry see it is losing its moral compass as it demands more bank-like authority? Maybe it has something to do with being too close to the trees to see the forest. U.S. Congressman Bill Thomas, Chairman of the House Committee on Ways and Means is not standing in the forest. He sees the same thing I've been concerned about since my first Credit Union Times' Letter to the Editor published in 1994 when I asked "Does your credit union operate in a manner that warrants a federal tax exemption ?" Unfortunately, fewer and fewer credit unions can honestly answer yes. If not careful, credit unions will soon reach the point of no return toward taxation. An NSF fee cap and other pro-member benefits will send the message to congress that our tax-exemption remains justified. Dale Kerslake President/CEO Cascade FCU Seattle, Wash.