In response to your article "Consumer Groups Urge Fed to Stop `Abusive' Bank Overdraft Charges" (CU Times, Feb. 12), I would like to provide some facts that will help your readers better understand this issue, especially since many credit unions offer similar products. The facts regarding these products are: *As NAFCU pointed out in its comment letter to the Federal Reserve Board, overdraft privilege fees do not meet the criteria of a finance charge as defined in the Truth in Lending Act. Trying to apply an APR calculation to these flat, one-time service fees makes no sense. Most importantly, these fees are the same fees financial institutions charge for an NSF when the check is returned. With a sound overdraft privilege program like Member PrivilegeSM, it costs members nothing more to receive the benefit of having the check paid instead of being returned. *Overdraft privilege is a service financial institutions make available to members. It is not "imposed," as some would claim. It can be accessed or not as the member chooses. Members can easily opt out at any time, but few do – typically less than one percent – because most prefer to have the safety net in case of error or emergency. *A good overdraft privilege program provides much-needed protection from mistakes and in emergencies for those consumers who don't use credit cards to cover overdrafts, who don't have multiple accounts, and who aren't eligible or don't want lines of credit. And it gives them an alternative to more expensive ways of covering unforeseen shortfalls. Overdraft privilege acknowledges reality and the need in the marketplace for this kind of service. It enables many customers who might otherwise be written off by financial institutions for one or two bounced checks to get back on track and better manage their finances without incurring harsh penalties, damaged credit ratings and embarrassment. * In an opinion issued last fall, the Ninth Circuit Court of Appeals confirmed the right of financial institutions to use Social Security direct deposits to offset overdraft checks or debit transactions. Again, it makes little sense to limit an institution's ability to apply a deposit against a draft created on the account. We believe that clear and ongoing communication is the primary difference between an effective, consumer-focused overdraft privilege program and one that is open to criticism. A well-managed program communicates with members at multiple touchpoints so that they understand the service upfront before they ever use it, they are encouraged to use it responsibly, and they are informed every time they are protected from bouncing a check. With this kind of program in place, we have received feedback from our customers that consumers uniformly give the program high praise. They appreciate it because it saves them from merchant bounced-check fees, late fees, lowered credit scores, and the sheer embarrassment associated with a bounced check. We support regulatory guidance that eliminates the overly aggressive practices that have hurt the image of overdraft privilege. And we believe that a well-run overdraft privilege program is truly a benefit to members. We encourage credit unions to look at all the facts when they consider such a program. Joe Gillen Founding Partner and CEO Pinnacle Financial Strategies Houston, Texas

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