Overdraft Protection Programs, Done Right, Serve a Purpose

I agree with Mike Welch’s assessment in his April 9th column (“Putting a Little Bounce In Checking Accounts”) that overdraft programs, when done right, are a “win-win for the credit union, its members and recipients” of what otherwise are bad checks. Bounce protection programs have been one of the most hotly debated new products to hit the credit union industry in recent years. Most opponents of such programs often ignore critical points. First, the expense of a returned check does not stop with the NSF fee charged by the credit union. In fact, this fee frequently is only a small portion of the total cost when additional fees are slapped on, including late fees and returned check fees from the merchant. When these costs are factored into the equation, a solid bounce protection program absolutely saves members money by not returning the check and charging only one fee. Another important consideration is consumers’ ability to access cash. The fact we have gone from a couple hundred payday loan centers in the country in the early 1990s to 11,000 locations today suggests that a bounce check program might be the right alternative for members or potential members who otherwise pay exorbitant interest rates and tacked on fees. There is also the fact that mistakes do occur and have increased with the popularity of debit cards. Protection against mistakes that does not require members to apply for some optional service in advance is a cornerstone of quality service. Saving members money, providing them with financial choices and helping them when they need you most should be the goal of all credit unions. The question of whether bounce protection leads to a change in members’ financial behavior that is ultimately detrimental to them and the credit union has simply not be borne out by the experience of credit unions who have, as Mike points out, done it right. Such programs save the member time, money, inconvenience and potential embarrassment. There is no doubt in my mind that a bounce protection program dovetails with credit unions’ continued excellence in member service. Keith E. Nolan President & CEO NAFCU Services Corporation (NSC) Arlington, Va.