Financial Experts Concerned Over Credit Union Overdraft Fee Debt

It has been four years since policies of overdraft fee protection were set in place for consumers, but the complaints of these credit union fees have not gone down. According to the Consumer Financial Protection Bureau (CFPB), overdraft fees and non-sufficient funds (NSF) fees makeup the large majority of the total checking account fees that consumers typically face.

The CFPB is stressed by these statistics, because the policy implemented was supposed to prevent credit unions and other financial institutions from “loaning” debit card consumers the money they needed to compete their purchase, which overran their account balance; the loans were about $35 per transaction.

Credit union overdraft fees are meant to be negative financial incentives, to prevent consumers from overspending and overusing their debit cards. But the latest report from CFPB suggests that consumers who have chosen to sign up for credit union overdraft protection are paying a high price for the convenience.

The report shows that overdraft and non-sufficient fund fees makeup about 75% of their total checking account fees, and overage over $250 per year. The report also shows that most overdraft fees are only paid by a small number of customers; 8% of customers pay nearly 75% of all overdraft fees.

Furthermore, the study noted that the overdraft fees typically exceeded the amount of the overdraft itself. Based on these numbers, experts are calling for additional rules to protect consumers against hefty overdraft protection.

Credit Union Overdraft Protection Complications

These fees are charged when a credit union or other financial institution has to move money into a checking account to cover a transaction. As debit cards became more popular in use after credit cards were seen to put consumers in inadvertent debt, consumers found themselves with the same problem as they were soon slammed with overdraft fee debts.

To help improve this trend, the Consumer Financial Protection Bureau is currently analyzing the overdraft fee practices of credit unions and other financial institutions, and may impose new rules by next year.

These rules will be modifications or add-ons to the federal policy implemented in Aug. 2010, which prohibited financial institutions from charging overdraft fees unless the consumers have opted for overdraft protection or the institution’s specific overdraft coverage program.

Many consumers who did opt for overdraft protection through their credit union and were aware that they were being charged, are highly disappointed in this outcome, because overdraft fees are not only steep, but also have been rising in price over the years.

It is important to note that big banks were the primary targets of unethical practices regarding overdraft fees; however, credit unions have recently faced the same allegations. Experts explain that credit unions became concerned over losing customers and had reacted by increasing their insufficient-fund fees.

Currently, numerous credit unions are facing legal action for failing to disclose their fee policy, and improperly charging overdraft fees. Credit Unions facing these allegations include:

• Tinker Federal Credit Union, Oklahoma City, OK
• Space Coast Credit Union, Melbourne, FL
• Lake Michigan Credit Union, Grand Rapids, MI
• Eastman Credit Union, Kingsport, TN

While, credit unions have been an attractive option for customers for years as they are often promised lower fees than banks, they have been accused of raising overdraft fees and other charges.

If you have incurred overdraft fees from a credit union listed above, you may be eligible to participate in a free class action lawsuit investigation.

Join a Free Credit Union Overdraft Fee Class Action Lawsuit Investigation

If you have incurred overdraft fees from a credit union, you may be eligible to participate in a free class action lawsuit investigation.

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