Credit union advocates and lawmakers are arguing over the benefit of overdraft protection credit union programs as the CFPB considers new rules.

The Consumer Financial Protection Bureau (CFPB) has recently been soliciting public opinion on potential changes to the rules that govern overdraft fees. In a financial climate where consumers are growing increasingly frustrated with excessive overdraft fees, changes to overdraft rules could be critical for both financial institutions and their customers.

The CFPB is looking to change the 2009 rule which prohibits banks and credit unions from assessing overdraft fees on ATM withdrawals and debit transactions unless customers have already consented to those fees being charged. Some groups support the changes to the rule while others strongly oppose, with tensions rising on both sides.

The Credit Union National Association (CUNA), which “advocates for the entire credit union movement” according to its website, argues that overdraft fees should be allowed to continue as they are.

According to Credit Union Times, CUNA senior director of advocacy and counsel Alexander Monterrubio argues that consumers are allowed to make the “personal choice” to opt into overdraft protection credit union services.

Monterrubio also claims that overdraft protection gives consumers the “comfort of knowing a transaction, especially a necessary or emergency purchase, will be honored.” According to Monterrubio, overdraft protection services allow consumers to make the purchases they need instead of turning to payday loans which can be associated with high interest rates.

Another credit union advocate, National Association of Federally-Insured Credit Unions (NAFCU), agrees with Monterrubio and says that the benefits of overdraft protection credit union programs are highly underrated. NAFCU senior counsel for research and policy Andrew Morris notes that most credit unions would be willing to waive overdraft fees for their customers on a case-by-case basis.

“Rather than seeking to limit or eliminate overdraft services, NAFCU believes that consumers would be better served if the Bureau provided the financial services industry with guidance and additional flexibility so that credit unions can create a diverse range of options that fit the various needs of members, whether it be convenience or borrowing,” Morris said in a statement reported by Credit Union Times.

However, other groups and government officials claim that the cons of overdraft fees far outweigh any benefits. New York City’s commissioner of consumer affairs Lorelei Salas says that overdraft balances act as “instant loan[s]” which allow consumers to follow through with transactions that will only cause them long term harm.

“Alternative financial services are a more appealing option when checking accounts at mainstream financial institutions prove so costly,” Salas said, according to the Credit Union Times. “No banking product should drive consumers to shadowy back-alley financial services.”

The Center for Responsible Lending, a group that claims to be working to “protect homeownership and family wealth by fighting predatory lending practices,” sides with Salas in supporting increased overdraft fee protections or maintaining the protections already provided.

Although some banks and credit unions claim that increased protections would leave them with massive costs, the center argues that the harm sustained by credit union and bank customers due to unfair overdraft practices is “grossly disproportionate to costs to financial institutions.”

If you were charged overdraft fees or NSF fees by your bank or credit union that you believe are improper for any reason, the attorneys who work with Top Class Actions are ready to investigate these fees on your behalf.

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This article is not legal advice. It is presented
for informational purposes only.