CUNA, NAFCU Set the Record Straight on Credit Union Overdraft

Aaron Klein’s recent article in Politico Magazine on credit union overdraft shows a startling lack of awareness of credit unions, their role in the marketplace, and the way they serve members and communities.

Far from the inflammatory terms, the fact is credit unions are unquestionably one of the most — if not the most — consumer-friendly participants in the marketplace.

The data shows it from both a financial perspective and how our members feel about their credit union.

Mr. Klein diminishes generations of credit unions putting people over profits, and also shifts focus away from the numerous predatory entities in the marketplace that credit unions exist to fight against.

Beyond the rhetoric, let’s look at the truth.

Credit union members using overdraft protections have affirmatively opted into these services for a variety of reasons, in accordance with regulatory requirements, including disclosures. These aren’t hidden or obscured costs.

They do this because overdraft programs provide a needed service and offer real value. Using an overdraft program is better than not being able to buy groceries to feed your family or missing a mortgage payment, and certainly doesn’t sound like taking advantage of members.

Going a step further, every credit union overdraft program in California — or America — is different.

Credit unions evolve their programs to meet the needs of their members, not the other way around.

We win when our members win, and that means we work with our members for the best outcome for them. Ninety-eight percent of credit unions waive overdraft or NSF fees on a case-by-case basis, according to the 2023 Federal Reserve Meeting Survey, 78% intervene when a member engages in frequent overdrafts, and 71% provide targeted outreach or education to members who miss payments.

Credit union overdraft programs are also subject to substantial oversight and regulations supervised by state regulators, the NCUA and the CFPB.

Consumer protection is a supervisory priority for NCUA. It reviews things like overdraft protection and non-sufficient funds fees during exams, and specifically made overdraft programs a priority starting in 2022.

Many state-chartered credit unions are subject to multiple examinations a year, depending on how the schedules of the NCUA, their state regulator and the CFPB (if they are above $10 billion in assets) line up.

The big numbers may seem to paint a scary picture, but there’s nothing wrong with credit union members making a choice to opt into overdraft services for their personal benefit.

The argument about credit unions supposedly posting debits before credit is an example of cherry picking the data to fit a narrative. The very CFPB report Mr. Klein links to shows 0% of credit unions specifically run debits before credits (compared to 1% of banks).

Mr. Klein can personally object to how consumers choose to manage their finances, but it’s unacceptable to paint credit unions and the good work they do in such a misleading way.

Jim Nussle is president and CEO of the Credit Union National Association (CUNA).

B. Dan Berger is President and CEO of the National Association of Federally-Insured Credit Unions (NAFCU).