Following the Consumer Financial Protection Bureau’s June 29 deadline for comments on overdraft programs, CUNA on Monday released the comment letter it sent to the bureau, along with the results of a survey it conducted among its members.
In the letter, CUNA urged the bureau to refrain from imposing new rules and limits on credit union overdraft programs.
"Credit unions offer overdraft programs as a convenience and accommodation for their members and have indicated many members appreciate these services,” wrote Deputy General Counsel Mary Mitchell Dunn.
“As the bureau considers what next steps it might take regarding overdraft programs, we urge the agency to take into consideration the importance of overdraft programs to consumers who do not want to be embarrassed at the point of sale and want the comfort of knowing a purchase or transaction, such as a mortgage payment, will be honored,” Dunn wrote.
Dunn told Credit Union Times that CUNA made a point to differentiate between programs that allow members to transfer funds to cover overdrafts from deposit accounts, and programs in which the credit union covers overdrafts for members, also known as courtesy pay.
“We really took them to task, because they didn’t define what they meant by overdrafts,” she said.
The survey among 543 CUNA member credit unions revealed that all but 2% surveyed offer some form of overdraft protection, with nearly all respondents offering funds to be transferred from a savings account.
More than 80% of respondents indicated that at least half of their members with checking accounts have signed up for one or more overdraft protection programs, and roughly two-thirds of respondents have staff inform members of such programs when a member contacts the credit union after incurring an overdrafts, Dunn said.
A June 2012 study by Pew Charitable Trusts reported that the country’s 12 largest credit unions charge an average of $5 per transaction to transfer funds from a deposit account, compared to a $12 average at the nation’s 12 largest banks.
Additionally, those top-12 credit unions charge just three-quarters of what the top 12 banks do for courtesy pay services, Dunn said.
Despite the CUNA kudos, the Pew report was critical of credit union overdraft practices, especially when it comes to disclosing fees.
“For several of the credit unions, the details of their overdraft penalty plans were too poorly disclosed to be able to determine exactly the types of transactions allowed to overdraw an account,” the report stated.
However, CUNA reported its survey found credit unions do disclose overdraft information to members. Almost all respondents in the CUNA survey say they inform their members about overdraft protection programs disclosures provided at account opening, as well as verbally by staff when accounts are opened.
A study released Monday by the Independent Community Bankers of America reported that all community banks disclose overdraft program details, and nearly all inform customers of alternatives to overdrafts, and structure overdrafts to minimize the potential for fees.
The Pew study recommends the CFPB implement new regulations regarding overdraft disclosures, fees, transaction posting order and dispute resolutions.
Dunn said CUNA is concerned the CFPB will develop new overdraft rules, so the trade organization will work to minimize the impact on credit unions.
“Any loss of flexibility, or requirements above what credit unions have to do right now, won’t be effective because credit unions are already doing the right thing,” Dunn said.