Credit unions across the U.S. are addressing overdraft fees, mobile banking, and reward programs in a bid to attract demographic groups including millennials and underbanked consumers.

In a recent credit union study, more than 50 percent of individuals belonging to the millennial generation claimed that they would leave their current financial institution to switch to an account that didn’t automatically pay overdraft items for a fee. The study found a similar result in underbanked and unbanked customers (defined as those consumers who have used an alternative to banking in the last year, such as a payday loan or a check casher), noting that more than half of those customers surveyed would make the switch, and about a quarter would pay $10-$20 per month for an account that offered no overdraft fees.

The credit union study also found that when compared to the mass market, millennials are three times more likely to claim that mobile banking is their preferred method. Millennials’ preferences are leading financial institutions to further adopt this practice.

Researchers say this report indicates that there is no one-size-fits-all when it comes to attracting certain key demographic groups. The report stated that giving clients more control over the banking relationship is key to winning over millennials and underbanked clients.

Millennials are the largest generation group in American history, with more than 75 million potential banking consumers. According to the FDIC, nearly 25 million Americans are deemed “underbanked,” while more than 9 million are unbanked.

Credit Union Overdraft Fee Practices Under Scrutiny

A credit union class action investigation has recently been launched in response to consumer reports that many of these financial institutions have unfairly raised overdraft fees at a faster rate than banks.

In addition, credit union customers claim that they are not fully informed about how the overdraft fees are calculated, which causes confusion. Consumers claim that many credit union overdraft programs assess fees on the available balance, which in turn may cause an overdraft fee to occur even if the actual account balance did not go negative.

Credit union customers claim to feel mislead by the financial institutions when they are not informed of their available balance prior to the transactions that lead to overdraft fees. Some consumers further allege their credit unions intentionally process transactions out of order as a way to charge an overdraft fee.

Overdraft fees are typically imposed when a bank or credit union is required to move money into an account in order to pay for a transaction.

Credit Union Overdraft Fees Class Action Lawsuits

At least four California credit unions have already been hit with overdraft fee lawsuits. It is not clear what approach the credit unions will take to address these and potential future overdraft fee class action lawsuits.

In the past, credit unions were quick to settle a wave of ATM lawsuits, but they may decide to fight the upcoming overdraft fee lawsuits.

Some of the top U.S. credit unions include The Golden 1 Credit Union, Alliant Credit Union, Security Service Federal Credit Union, Star One Credit Union, and First Technology Federal Credit Union.

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