Pew reviews on-base CU, bank checking, overdraft

October 28, 2014

Pew reviews on-base CU, bank checking, overdraft

The Pew Charitable Trusts released a report on how well military consumers are served by banks and credit unions on military bases and reiterated its suggestions to CFPB on how to improve overall safety and transparency regarding checking and overdraft practices.

Yesterday's report was one in an ongoing series from Pew over the past several months as it continues to advocate its policy objectives regarding checking account disclosures and overdraft practices. Achieving those would require the promulgation of new rules by CFPB, which has given no indication that it has decided what direction to take on these issues.

For example, Pew said 42 percent of on-base banks and 17 percent of on-base credit unions do not provide disclosure information online. It also made the observation that most credit unions and banks do not automatically decline ATM transactions or sales that would lead to an account being overdrawn – yet they do decline these transactions unless members opt-in to an overdraft program.

Quincy Enoch, NAFCU's associate director of legislative affairs and military liaison, said the picture presented in the report is limited. "We have some issues with the methodology used in report, and we don't think it gives a full picture of how service members are being served," said Enoch. "NAFCU would encourage CFPB to take a closer look at the excellent service credit unions continue to provide servicemembers when considering next steps."

While the report is limited, it does present a favorable view of credit union practices vs. those of banks. In addition to the above, the findings showed the median on-base bank overdraft fee was $35, compared to the median on-base credit union fee of $29. It said 65 percent of banks and just 6 percent of credit unions included mandatory arbitration clauses in checking account agreements. The report studied checking accounts at 18 on-base banks and 111 on-base credit unions.

Pew encouraged CFPB to promulgate rules that would require financial institutions to summarize information on terms and fees clearly, use "reasonable" overdraft fees and prohibit mandatory binding arbitration clauses in checking account agreements, among other things.

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