I think it's fair for State Employees CU of N.C. CEO Jim Blaine to say that courtesy pay is a cash cow for credit unions. Many credit unions do not have the scale and operating efficiencies of competing behemoth financial institutions. In today's slim margin environment, credit unions have to look for ways to survive financially.
Looking at fees charged for negative member behavior is not an uncommon practice. After all, many abusers of courtesy pay have bad credit and contribute little to the cooperative. That's right. Members are supposed to contribute something, not just receive free checking and contact the call center with every little problem they have balancing their finances. Members who abuse courtesy pay are the same chronic abusers of NSFs. Some credit unions think it's appropriate to close the checking account if a member pays too many NSFs. Now isn't that pushing them out to the payday lenders? I think that we should be encouraging the best practices in offering courtesy pay, including offering free financial counseling to these folks.
I would also like to weigh in on whether courtesy pay should be classified as a loan (TIL) or not. We all know that if the “powers that be” reclassify it to a loan–it's dead. Does that hurt credit unions? Probably. So let's call it what it is. “Grace”. That's right–grace. Credit unions give grace all the time. If CMCU cashes Jim Blaine's check drawn on State Employees' Credit Union, did we just make him a loan? Of course not. We gave him grace. Do some financial institutions charge a fee for check cashing? Of course they do. Is anyone clamoring for this practice to be called a loan? Not yet (but maybe this is the next crusade for Jim). It is a needed service that each credit union should evaluate.
Credit unions have decided if they want to bounce their members' checks or not. For those that are engaged in courtesy pay, let's strive towards the best practices and keeping the fees lower than the competition. Now let's all say grace.
Robert Bruns
CEO
Charlotte Metro Credit Union
Charlotte, N.C.
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