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June 18, 2012

June Monitor spotlights cost of regulations

June 19, 2012 – Survey findings from NAFCU's June Economic & CU Issues Monitor provide more evidence that the current regulatory environment poses serious cost implications for credit unions.

Regulation E, which requires operators of ATMs to include fee disclosures on ATM machines, is a case in point. According to NAFCU's June survey, 5.9 percent of responding credit unions saidtheir disclosures or compliance signage had been vandalized or removed unlawfully. Of the 3.9 percent of respondents who have been sued over ATM disclosures, half suffered vandalism to their compliance signage.

The vandalism adds to an already costly picture for maintaining ATM compliance – survey participants indicated that an average of 9.5 hours and $1,050 is spent each month solely to remain compliant with the regulation.

The June Monitor also found that every survey respondent's credit union offers alternatives to overdraft protection, including linked accounts and overdraft lines of credit. However, these alternatives may be limited in the future as a result of new regulations.

For now, credit unions are still able to membersoverdraft protection in a number of ways. Nearly two-thirds (64.7 percent) of survey participants contact members who repeatedly incur overdrafts. Several respondents noted that text alerts are offered to notify members of an overdraft charge.

While most respondents (92.3 percent) charged overdraft fees, nearly all of those who did (97.9 percent) reversed some of those charges on a case-by-case basis.

Furthermore, the Monitor survey found that overdraft protection programs have proved popular, with 17.4 percent of respondents' members specifically opting in to use them.

Respondents were also asked about noninterest-bearing transaction accounts. Full insurance coverage for non-interest-bearing transaction accounts is set to expire Dec. 31. After that, these accounts will only be insured up to $250,000.

A substantial majority (84.9 percent) of survey respondents offer these accounts. The average credit union offering non-interest-bearing transaction accounts has more than 22,200 of these accounts. On the impact of the possible reduction in insurance coverage for member business accounts, responses spanned the gamut from little to no impact, to an exodus of business accounts with more than $250,000.

For more information, see NAFCU's June Economic & CU Issues Monitor (login required).