The industry's quandary on overdraft protection policies and the prospect of restrictive legislation in Congress drew lively and intense debate at last week's convention of the New Jersey Credit Union League.
State Employees' Credit Union CEO James Blaine appealed anew for credit unions to rethink of overdrafts. He also asked the industry to stop making excuses.
Countering the North Carolina executive's oft-repeated claim that CUs to their peril rely too heavily on overdraft income was former NCUA Chairman Dennis Dollar who defended CU policies as providing a real value to members if handled properly by CU management.
In a panel sessions at the Atlantic City convention site, the State Employees' CEO questioned why CUs pursue fee policies that undermine the financial well-being of their members while CU managers continue blaming any number of factors for their actions.
"It's the competition, NCUA, slimmer margins or simply somebody else's fault, but the fact is the world is changing, and we're still making excuses for supporting a policy that many of our members cannot afford," Blaine said.
Overdraft bills currently in the Congress, he said, underscore what is coming as well as the move last week by Bank of America and JPMorgan Chase to reduce fees. To offset lost overdraft income, Blaine maintained CUs ought to undertake a major management overhaul of operations to reduce or get rid of labor intensive services.
Many CUs have too much on their plate, he said, citing business lending as well as extensive checking operations. "Maybe we ought to get back toward offering plain vanilla services," said Blaine.
In a rebuttal, Dollar, head of a Birmingham, Ala., CU consulting firm, called Blaine a friend and colleague. He told Credit Union Times that Blaine remains a vigorous consumer champion. However, he has differences with Blaine in seeing that members look to CUs rather than payday firms to get them through rough periods and are willing and able to absorb the fees.
Dollar said members truly appreciate the CU service in covering bad checks particularly "when they write a $70 check on Friday, but their payroll doesn't clear until Tuesday." Moreover, members are willing to pay a $25 bounced mortgage check fee rather than a $125 charge from the mortgage firm.
By rights, CU members are actually "breaking the law when they write a bad check," but they look to an understanding CU to help them out so the overdraft service is indeed value added.
But Blaine lamented the willingness of so many CUs that rely on such fee income just to stay afloat in these difficult times. What has changed, he asked, to cause CUs to reduce their thinking to that level?
Officials of the New Jersey league noted that the Blaine-Dollar face off occupied just a portion of the convention panel debate, which also focused on corporate stabilization, risk-based lending and other areas, but the frank discussion turned out to be a highlight for the crowd of 800 assembled at the Taj Mahal Hotel Casino.
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