I think it's fair for State Employees CU of N.C. CEO Jim Blaineto say that courtesy pay is a cash cow for credit unions. Manycredit unions do not have the scale and operating efficiencies ofcompeting behemoth financial institutions. In today's slim marginenvironment, credit unions have to look for ways to survivefinancially.

Looking at fees charged for negative member behavior is not anuncommon practice. After all, many abusers of courtesy pay have badcredit and contribute little to the cooperative. That's right.Members are supposed to contribute something, not just receive freechecking and contact the call center with every little problem theyhave balancing their finances. Members who abuse courtesy pay arethe same chronic abusers of NSFs. Some credit unions think it'sappropriate to close the checking account if a member pays too manyNSFs. Now isn't that pushing them out to the payday lenders? Ithink that we should be encouraging the best practices in offeringcourtesy pay, including offering free financial counseling to thesefolks.

I would also like to weigh in on whether courtesy pay should beclassified as a loan (TIL) or not. We all know that if the “powersthat be” reclassify it to a loan–it's dead. Does that hurt creditunions? Probably. So let's call it what it is. “Grace”. That'sright–grace. Credit unions give grace all the time. If CMCU cashesJim Blaine's check drawn on State Employees' Credit Union, did wejust make him a loan? Of course not. We gave him grace. Do somefinancial institutions charge a fee for check cashing? Of coursethey 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 aneeded service that each credit union should evaluate.

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