Distinguishing credit unions from other financial service providers offering overdraft programs, Cunningham pointed out that credit union programs are intended to spare the member embarrassment and additional fees associated with bouncing a check. She noted CUNA's 2004 best practices policy statement on the subject "to distinguish credit union overdraft services from many bank programs that were being marketed to boost fee income without regard for the best interests of consumers."

These best practices call on credit unions to refrain from deceptive advertising, promoting the regular overdrawing of accounts, including overdraft coverage as part of available funds on statements, and failing to inform frequent users of better alternatives.

USA Federal Credit Union, which counts members of the military as the bulk of its membership, is a prime example of a responsible credit union program. When the credit union noticed some members regularly dipping into its Privilege Pay program when it was rolled out in 2003, the credit union modified its program.

Cunningham drew parallels between USA FCU's program and Maloney's legislation. Members are informed that they automatically qualify for the program after 30 days of positive activity and aggregate deposits of at least $750 unless they choose not to accept the service. The credit union has a liberal policy of refunding overdraft fees while educating them about the service and encouraging them to opt out if they do not want it.

USA FCU also makes it a practice of paying the smaller dollar items first so as not to generate additional fees by charging them to the overdraft as well as posting deposits to the account before credits. Other alternatives, such as a draft from shares, are considered first. Privilege Pay fees are also cut off at five items regardless of how many are presented

All notices to members regarding Privilege Pay fee assessments also include the toll-free number to the financial counseling service, Balance.

While Cunningham's credit union discloses the actual balance to members on ATM slips, their ATM processor told them that a warning could not be provided at a point of sale that would trigger the Privilege Pay. She wanted to encourage sufficient time for compliance on this matter.

Credit unions do have a sticking point with Maloney's bill in how overdraft fees are disclosed. If provided as an APR, credit unions could easily exceed their 18% interest rate cap. Cunningham was to offer the alternatives of amending the Federal Credit Union Act to provide an exemption in this particular instance; amending the Truth in Lending Act to define overdraft fees as a service fee rather than finance charge; or require that only the portion of the

overdraft fee that exceeds the normal NSF fee, since this is what it is supposed to replace, be considered a finance charge.

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