Smaller Credit Unions Rely More on Overdraft Fees, Analysis Reveals

Credit unions with $1 billion to $5 billion in assets relied significantly more on overdraft and non-sufficient fund fees than larger credit unions, according to NCUA data.

Starting with the Call Reports for the first quarter that the NCUA posted in late April, credit unions with more than $1 billion in assets are required to report both their overdraft fees (OD) and non-sufficient funds (NSF) fees.

CU Times analyzed the fees as annualized percentages of average assets by asset classes using NCUA data from the Callahan & Associates / Peer Suite. The data showed that for the three months ending March 31:

• The Top 10 credit unions, which all had assets of more than $18 billion, had OD+NSF fees of $232 million, or 0.22% of average assets, while other fees were $135.4 million, or 0.13% of average assets.
• The 11 credit unions with assets of $10 billion to under $18 billion had OD+NSF fees of $71.1 million, or 0.19% of average assets, while other fees were $47.5 million, or 0.13% of average assets.
• The 59 credit unions with assets of $5 billion to under $10 billion had OD+NSF fees of $168.2 million, or 0.16% of average assets, while other fees were $156 million, or 0.15% of average assets.
• The 362 credit unions with assets of $1 billion to under $5 billion had OD+NSF fees of $439.8 million, or 0.23% of average assets, while other fees were $420 million, or 0.22% of average assets.

The remaining 4,126 credit unions with assets of less than $1 billion were not required to report OD+NSF fees. However, they had a higher reliance on total fees: 0.57% of total assets, compared with 0.38% for the 442 larger credit unions.

The NCUA doesn’t provide historical comparisons. The only other data is for the full year of 2022 reported by credit unions and banks chartered by California. That data also showed the larger credit unions relied less on overdraft and NSF fees, and the larger group’s OD+NSF fees fell sharply from 2022 to 2024’s first quarter, while they remained little changed for the group with $1 billion to $5 billion in assets.

California passed a law that required state-chartered banks and credit unions to report annually on the amount of overdraft and non-sufficient fund fees they collect. The California Department of Financial Protection and Innovation released a report in March 2023 showing its first batch of data for 2022.

For the California credit unions with $1 billion to $5 billion in assets, overdraft and NSF fees were 0.18% of average assets in 2022. Data showed their OD+NSF reliance was 0.19% in the first quarter.

The California credit unions with more than $5 billion in assets collected OD+NSF fees that were 0.13% of average assets in 2022 and 0.08% in the first quarter.

The CFPB proposed a rule in January that would set overdraft fees at a maximum of $14 for the largest credit unions and banks – those with $10 billion in assets or more. That threshold applied to 21 of the nation’s 4,702 credit unions as of Dec. 31.

The National Consumer Law Center and other consumer groups support the rule generally, but specifically want to see the threshold lowered to $3.

The trade group America’s Credit Unions has opposed the rule, saying it could wind up hurting some members by limiting their options in times of trouble.

NCUA and FDIC data showed both banks and credit unions have been relying less on fees in general for about 20 years.