CUNA and NAFCU want credit unions to be able to charge a fee for covering an overdraft fee in some cases even if the consumer doesn't opt in for such coverage, according to letters both trades sent to the Federal Reserve.
Both associations said the proposed regulation that would require people to opt in, if they want to participate in an overdraft program, could cause credit unions to lose money when they approve a transaction based on sufficient funds but that proves not to be the case.
"NAFCU understands that there were some abuses regarding overdraft protection that the board has rightfully addressed. Nonetheless, given that financial institutions cannot possibly have real-time knowledge of all of a consumer's purchases, the rule should provide a narrow exception in instances where institutions approve a transaction when adequate funds exist and are then contractually obligated to pay that transaction at a later date when there are insufficient funds," wrote Dillion Shea, NAFCU's associate director of regulatory affairs.
CUNA Senior Assistant General Counsel Jeffrey Bloch expressed the same view and wrote that not allowing for an exception will mostly hurt small CUs "as opposed to larger institutions that use real-time systems."
The Fed's proposed changes to Regulations DD and E take effect on July 1.
Bloch also suggested that when credit unions and banks report overdraft fees charged to consumers, the financial institutions should be allowed to title them "total overdraft fees for paid items," to distinguish them from items that are returned unpaid.
He also suggested that the Fed post a list of frequently asked questions, with answers, on its Web site, in light of the considerable interest among financial institutions in this issue.