Trade Group Asks NCUA to Abandon Overdraft Fee Reporting
America’s Credit Unions says institutions could face reputational damage
The National Credit Union Administration should abandon plans to make public overdraft fee income and non-sufficient fee income at the largest credit unions, America’s Credit Unions said Monday.
Starting March 31, credit unions with more than $1 billion in assets will be required to report overdraft fee and NSF fee income as part of their quarterly call reports.
“America’s Credit Unions is concerned that, by publicly releasing the data, credit unions could face reputational harm if the data were to be cherry-picked to tell misleading stories,” the trade group said in a statement. “Many Americans rely on value-based programs such as overdraft protection to help make ends meet and pay for necessary expenses.”
America’s Credit Unions estimated that more than 400 financial institutions will be impacted by the call report change.
The trade group also complained that the NCUA did not give credit unions enough time to respond to that plan. Changes to the call reports were released in December and credit unions were given only 30 days to respond to the proposal.
“There was no alert shared with credit unions, information posted on the NCUA website, or other source flagging this notice containing important Call Report changes,” Ann Petros, the trade group’s vice president of regulatory affairs, wrote in a February letter to NCUA Chairman Todd Harper. Petros said that many credit unions learned of the changes when Harper spoke publicly about them in February.
Petros suggested that the NCUA should post all proposed changes to call reports at least two quarters in advance so that credit unions have adequate time to review and comment on the changes. She said that while the NCUA has said the call report data will create parity with bank call report data submitted to the Federal Deposit Insurance Corporation, the agency has not clearly identified a rationale for adding the new information.
Making public the amount of the fees being collected is part of a larger strategy the Biden Administration is using in an attempt to appeal to consumers. The Biden Administration has made it a point to eliminate what it calls “junk fees.” Several agencies, including the Consumer Financial Protection Bureau and the Federal Trade Commission, have proposed rules limiting or eliminating fees that are tacked onto concert tickets, airline tickets and credit cards.
Overdraft and NSF fees, from the Biden Administration’s perspective, are included in the “junk fee” category. These fees are supposed to cover the cost and risks of overdrafts and overdraft programs, but opponents charge that they enrich financial institutions at the expense of consumers.
In a report published in March 2023, the California Department of Financial Protection and Innovation found that state-chartered credit unions brought in $183.1 million in overdraft fees in 2022, compared with $35.1 million that state-chartered banks did. California credit unions charged $69.6 million in nonsufficient fund fees, compared with $38.2 million for banks. As a result, NSF and overdraft fees made up a median 3.23% of California credit unions’ net income, compared with 0.16% for banks.
Publicly releasing the data, and any reputational damage that follows, might be the point.