Newsroom

NAFCU Vice President of Legislative Affairs Brad Thaler wrote to the House Financial Services  Subcommittee on Consumer Protection and Financial Institutions ahead of its hearing today to examine overdraft fees. Thaler shared the association’s support for a fair, transparent, and competitive market for consumer financial services but cautioned that increased scrutiny or legislative efforts to eliminate overdraft protection programs are likely to result in significant negative impacts on borrowers and credit unions.

“The overdraft rules, originally issued by the Federal Reserve and now under the purview of the Consumer Financial Protection Bureau, made these programs something that consumers must opt in to in order to receive the service,” wrote Thaler, pointing out the evolution of overdraft protection programs and rise in credit union member requests for participation. “This opt-in requirement gives consumers control and the overdraft rule’s notice requirements have helped consumers to better understand the cost of overdraft programs.”

In the letter, Thaler noted how former Committee Chairman Barney Frank, D-Mass., previously recognized the importance of an opt-in system and how consumer choice should supersede legislation around overdraft programs stating at a 2009 hearing, “We wouldn’t, I believe, be in a situation where we are talking about legislation if you would have had an opt-in regime from the beginning.”

The CFPB in December issued two reports regarding overdraft and non-sufficient funds fees received by credit unions and banks. NAFCU believes that the reported impact from these fees, however, were flawed, given that the Bureau compared them to matchless hotel fees and seemingly forgot that “these programs are subject to federal and state laws and regulations,” noted Thaler. 

Thaler pointed out that the removal of overdraft programs could result in declined debit transactions and bounced checks ultimately leading to negative credit reports and adverse consumer experiences. NAFCU reminded Congress that surveys done by credit unions of  their members have shown they positively value the safeguards these programs provide.

In addition, NAFCU joined CUNA on a separate letter to the committee, expressing that hastily enforcing legislation to limit overdraft protection could disrupt members’ ability to utilize such programs to resolve short-term financial difficulties. The groups reiterated that many credit unions and banks have offered innovative ways to provide overdraft services that are fair and transparent to consumer needs. 

Read Thaler’s full letter. NAFCU continues to work with Congress and the CFPB to ensure credit unions and their members retain the right to use overdraft protection programs. 

Please note that this story has been updated to reflect an additional, joint letter sent to the House Financial Services Committee.