Credit Union Overdraft Fees Criticized by Credit Protection Bureau

An overdraft report released by the Consumer Financial Protection Bureau (CFPB) recently showcased some troubling statistics about credit union overdraft income.

The long-awaited report, which had been delayed for several years, showed that while bank and thrift service charges on deposit accounts have been on the decline since 2008, credit union overdraft fee income has done the opposite and increased by 15 percent.

Credit union overdraft fee income is difficult to pin down, because the information comes from several different sources. This lack of clarity makes it hard to determine or define how much of that income comes from overdraft and not-sufficient-funds fees.

Strunk & Associates’ reports that insufficient funds and overdraft fees collectively contributed to 11.6 percent of credit union operating revenues in 2012. For bank and thrift revenue, these fees contributed to 6.9 percent of operating revenue.

However, they also reported that a smaller percentage of income comes from NSF and overdraft fees for large banks than it does for small community banks and thrifts. For community banks and thrifts, 78 percent of fee income comes from NSF and overdraft fees, but for credit unions, these fees make up just over 50 percent of credit union fee income.

CFPB cites that the reason for this difference is because credit unions and large banks tend to serve more large commercial accounts. Community banks and thrifts serve more small community-based institutions, and therefore receive a higher percentage of NSF and overdraft fees.

CFPB Criticizes Overdraft Protection Programs

The CFPB report was highly critical of opt-in overdraft protection programs. Because of the high fees associated with such programs, financial institutions, credit unions, and banks are now required to provide opt-in programs rather than automatically enrolling their customers.

Consumers who are heavy overdraft users paid, on average $450 more during the first six month of the opt-in overdraft protection program compared to those who chose not to opt in.

These opt-in users also tended to experience more frequent involuntary account closures compared to those who did not opt in. The CFPB reported that these kinds of involuntary account closures make it more difficult for these consumers to successfully open future accounts.

Credit Union Overdraft Fee Litigation

There are an increasing number of consumers who are choosing to file or join class action lawsuits against credit unions, alleging corrupt policies which have increased the incidence of overdrafts and not-sufficient-funds fees.

Credit unions that are involved with or at risk for such class action lawsuits include, but are not limited to: San Diego County Credit Union, San Diego, CA; America First Federal Credit Union, Riverdale, UT; Randolph-Brooks Federal Credit Union, Universal City, TX; Suncoast Credit Union, Tampa, FL; and American Airlines Federal Credit Union, Fort Worth, TX. These credit unions rank from number 11 to number 15 on the list of top 50 wealthiest credit unions.

If you or someone you know has been subjected to excess or heavy overdraft fees or account closures and believe your credit union may be at fault, you may be able to join a class action lawsuit.

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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