Noninterest income has always been attractive, but now it is … quite interesting. Overdraft fee structures are again the focus of regulatory initiatives. If adopted, they would most certainly drive down noninterest income further for financial institutions everywhere. Advisors Plus has seen credit unions’ Courtesy Pay revenue represent 15-20% of total noninterest income. This is a significant portion of noninterest income at risk.

The CFPB recognizes that overdraft programs are viable solutions for helping members manage their finances. It wants consumers to stay in the mainstream of financial services providers, and steer clear of payday lenders and other providers that trap consumers into a prolonged and expensive cycle of debt.

Some potential changes to overdraft program regulations could require financial institutions to obtain opt-in permissions for checks and ACH transactions, establish “reasonable and proportional” fees, limit the number of overdrafts allowed over a specified duration and prohibit the processing of transactions to maximize overdraft fees. These new conditions could further reduce noninterest income for credit unions.

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