You can regulate the money out of the business, but you can'tregulate the personal responsibility out of the consumer. No matterwhat Washington does to keep credit unions and other lenders fromtaking advantage of the less well-educated, the desperate and theelderly, ultimately consumers have to take responsibility for theiractions.

It's a fine line to toe when you're charged with serving membersof modest means, pricing services like overdraft and payday loansto risk. But credit unions will likely lose members or potentialmembers to truly abusive competitors if they do not offer thoseservices. Then, credit unions will lose the opportunity to educatemembers and save them from themselves. Instead the regulatorsbelieve it's their job to tell consumers what's best for them.

The National Consumer Law Center has been particularly activelately in holding regulator and credit unions' feet to the fire.The NCLC is pushing solutions that make it less cost effective tooffer alternatives to the credit-challenged, and in the end,they're hurting those they are purporting to protect. Even atnot-for-profit credit unions, products must pay for themselves orbe supported by others. In recent weeks the NCLC attackedindividual credit union payday loan alternatives and overdraftservices.

Also Read:

• NCUA Sent Complaint About Payday Lending CUs
• Credit Union CEO Defends LoanProgram
• XtraCash CUSO Says Its ServiceValuable
• NCUA Promises Probe of XtraCashClients

Without pricing for the higher risk on a short-term,small-dollar loan, a credit union won't stay in business long. Theconsumer's only alternative then is to go to a genuine paydaylender, which is contrary to the NCLC's objective.

Louisiana FCU CEO Rhonda Hotard contested the consumer advocate's claims.Calculating an APR to include fees, which are not compounding andnot calculated in APR by law, detracts from the arguments that arebetter directed at truly abusive lenders. Louisiana FCU's programwas featured by the NCLC to the NCUA as not consumer-friendly. NCLCcharged that the credit union's rate was 145% for the loans, whichis a bald-face lie.

In reality, the credit union charges a 15% APR on the loan and a$15 fee for all applicants whether the loan is approved or not.Over two weeks the APR amounts to a couple of bucks. The fee cannotbe included in the calculation. Tell me, what is the APR on a $15fee for someone who is not granted a loan? On top of that, thecredit union's fee cannot be rolled into the loan. The credit unionisn't raking in the dough from the program either, which onlybrought in $30,000 last year. These are expensive programs toadminister and if NCLC works to shut them down at credit unionslike Hotard's, it is bad for consumers.

XtraCash, a CUSO offering a payday loan alternative product forcredit unions, doesn't allow borrowers to have more than one loanopen at a time.

Stop patronizing consumers as you would a 5-year-old. Make cleardisclosures in plain English (keep the lawyers out of it), and letthe consumer decide.

After the NCLC's love letter, which the NCUA vowed toinvestigate, the Consumer Financial Protection Bureau releasedreports on overdraft fees.

The CFPB found that over the past five years, bank overdraftfees declined as credit unions' increased by 15%. Still creditunions are charging $4 less per fee than banks, and the rate ofincrease is just slightly above inflation. The CFPB pointed outthat NSF and overdraft fees contributed 11.6% of 2012 credit unionoperating revenues, compared with 6.9% of bank and thrift revenueduring the same period.

But, according to Callahan & Associates, “Some credit unions misclassifiedthe NCUSIF Stabilization Income as other operating income on their5300 Call Reports. This means the growth in fee and other operatingincome discussed above is artificially inflated, but we can't besure to what degree.”

Ironically, the report was critical of opt-in overdraft protection programs, saying that consumers whoopted in paid $450 more under the new rules than those who did notop in, and they had more frequent involuntary account closures,making it more difficult to open future accounts. So now financialinstitutions are being criticized because they followed theregulations?

At the same time, the latest quarterly study on overdrafts by Moebs Servicesreported that financial institutions' overdraft income declined by$1 billion, in part due to regulatory uncertainty, seasonality andthe economy in general.

Credit unions are working to educate their members and stay inbusiness. The NCLC and the regulators need to recognize that theycannot restrain member-owned, not-for-profit credit unions'abilities to serve those of modest means and expect them to do itanyway.