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Latest ECU Monitor highlights overdraft programs, Regulation E, more
NAFCU's latest Economic & CU Monitor – now available for download – examines several topics, including economic returns from January, overdraft programs, Regulation E compliance, token errors, and more.
According to the ECU Monitor, a major concern for financial regulators is financial institution compliance with consumer financial law regulating payments and overdraft programs. Overdraft programs continue to enjoy consumer support based on analysis of opt-in rates reported by NAFCU members.
The association’s 2021 Federal Reserve Meeting Survey revealed that a majority of credit union members have opted into courtesy pay programs. Often these programs serve as an alternative, cost-effective form of short-term credit for members that must make a time critical purchase and protects members from predatory payday lenders. Respondents also reported that overdraft programs help support free checking accounts, financial literacy, and emergency loan programs.
However, overdraft programs remain the subject of ongoing regulatory scrutiny. The NCUA has indicated in its 2022 supervisory priorities that examiners will collect policies and procedures governing credit union overdraft programs; the CFPB also published new regulatory guidance regarding error resolution procedures.
On the topic of unauthorized P2P transfers, all survey respondents indicated they would support changes to Regulation E that adopt a more hierarchical error resolution process, while half reported that they had observed an increase in the number of error claims associated with P2P transfers.
Of note, respondents expressed their views on the CFPB’s most recent guidance related to token errors. Most respondents indicated that compared to other types of payments errors, it would take a longer time to investigate a token error. NAFCU recently expressed concern with the CFPB’s guidance regarding token error investigations, noting the regulatory burden involved with gathering technical information to validate the integrity of third-party systems and directories used to facilitate P2P transfers.
Lastly, NAFCU’s Credit Union Sentiment Index (CUSI) rose "solidly" in January due to an improved assessment of loan demand. Last month’s sentiment survey respondents attributed an improved outlook on earnings to anticipation of an improving interest rate environment.
NAFCU relies on survey responses to provide its members a glimpse of trends affecting the credit union industry as a whole and inform the association’s advocacy efforts. This month, credit unions are encouraged to provide feedback on the CFPB’s recent request for information regarding excessive fees. The deadline for participation is Mar. 31.
For more on NAFCU's award-winning research team, check out the association's Macro Data Flash reports for insights into interest rates, auto sales, home market.
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