CU Exec: Cut Fees Members See as Penalties

A credit union executive in Texas said she thinks the CFPB’s action against Bank of America for practices involving “junk fees” is another sign that credit unions don’t need to waste their time defending fees their members don’t want.

On July 11 the CFPB ordered the $2.4 trillion Bank of America to pay back $100 million to customers for practices that included what the CFPB described as “a double-dipping scheme to harvest junk fees.”

CFPB said its investigation found that Bank of America double-dipped by allowing $35 non-sufficient funds (NSF) fees to be repeatedly charged for the same transaction, generating “substantial additional revenue” over several years.

Stacy Armijo, chief experience officer for Amplify Credit Union of Austin, Texas ($1.5 billion in assets, 57,286 members), said credit unions should pay attention because it’s a strong indicator of how the CFPB feels about bank fees in general.

“While credit union fees may not be illegal, the CFPB has been clear anything that smells like ‘junk fees’ will inspire additional scrutiny and potential action, which means time, effort, expense and risk for credit unions,” she said.

But regardless of the CFPB’s view, Armijo said credit unions ought to cut junk fees because they’re unpopular with consumers.

“The industry calls them ‘services,’ but in customers’ eyes, they’re penalties, and they have the most detrimental impact on those who can least afford it,” she said. “That doesn’t live up to what we preach as ‘the credit union difference’ or ‘people helping people.’”

NAFCU and CUNA have both previously stated objections to the CFPB’s and President Joe Biden’s use of the term “junk fees,” saying it lumps in credit unions with practices used by some banks and payday lenders.

Amplify announced in February 2023 that it was eliminating all banking fees — including overdraft fees, account maintenance fees and wire transfer fees. In the first 12 months it said it saved members $2 million.

Revenue Impact of Dropping Fees

Dropping fees is expensive. A CU Times analysis of NCUA data showed Amplify and six other credit unions that cut fees last year took a bigger hit to profitability than most credit unions in the first quarter.

The seven credit unions charged 20 cents in fees per member in the first quarter, down from $7.95 a year earlier. Among all credit unions, fees per member were 22 cents in the first quarter, down from $17.62 a year earlier.

The fee-cutting credit unions generated first-quarter profits that were just an annualized 0.39% of average assets, down from 1.14% a year earlier. ROA was 0.81% for all credit unions, down from 0.87% a year earlier.

At Amplify, fees per member were 22 cents in the first quarter, down from $27.97 a year earlier. First-quarter ROA was 0.23%, down from 4.18% a year earlier.

Armijo said part of the lower ROA was the industry-wide fall in non-interest income from sales of mortgages and other loans.

Here’s how the other fee-cutters fared in the first quarter:

Advantis Credit Union in Oregon City, Ore. ($2.1 billion, 91,120 members) cut its overdraft and NSF fees from $25 to $10 per occurrence in March 2022. Fees per member were 14 cents in the first quarter, down from $13.04 a year earlier. First-quarter ROA was 0.12%, down from 0.78% a year earlier.

Affinity Credit Union in Des Moines, Iowa ($143.8 million, 13,703 members) cut ATM and debit card overdraft fees from $25 to $15 in October 2021. Fees per member were 46 cents in the first quarter, down from $16.50 a year earlier. First-quarter ROA was 1.56%, up from 0.87% a year earlier.

Alliant Credit Union in Chicago ($19 billion, 785,337 members) stopped charging members for overdraft or NSF fees on all of its checking and savings accounts in August 2021. Fees per member were 13 cents in the first quarter, down from $1.47 a year earlier. First-quarter ROA was 0.35%, down from 1.17% a year earlier.

Power Financial Credit Union in Pembroke Pines, Fla., ($905.4 million, 33,440 members) eliminated all overdraft and non-sufficient funds fees for members with personal or business accounts in October 2021. Fees per member were five cents in the first quarter, down from $22.95 a year earlier. First-quarter ROA was 1.48%, up from 0.45% a year earlier.

UW Credit Union in Madison, Wis., ($5 billion, 332,385 members) cut its overdraft and NSFs from $30 per occurrence to $5 in July 2021. Fees per member were 45 cents in the first quarter, down from $9.03 a year earlier. First-quarter ROA was 0.43%, down from 0.49% a year earlier.

WEOKIE Federal Credit Union in Oklahoma City ($1.5 billion, 63,404 members) cut its fees from $27.50 per occurrence to $15 per occurrence in September 2021. Fees per member were 18 cents in the first quarter, down from $36.37 a year earlier. First-quarter ROA was 0.59%, down from 1.19% a year earlier.