Last month, National Credit Union Administration Chairman Kyle Hauptman
The credit union industry takes every step necessary to ensure members are aware of the program and walk them through solutions. Credit unions invest in educating members about their financial choices and strengthening their finances. I have countless examples of how credit unions utilize a relationship banking model to work with members through tough times. One, in particular, stands out.
Our member was injured while at work and was only going to get 65% of her pay during her recovery. She knew she wasn't going to be able to afford all her bills, so she came to us. We granted her an extension on outstanding loans and offered her another loan for this short period, but she was hesitant to take out another loan because of her credit score. She already had overdraft protection, and the fee was lower than any other option — including being late on a payment or potentially having a bounced check.
So that's what she chose. She knew her options and made an informed decision that was best for her needs. She was able to make all her payments on time, and when she received her settlement, she was able to pay everything back. She just needed help over a hurdle.
Our members don't use overdraft protection on frivolous things, they're using it for necessities. No one should have to decide between putting food on the table or gas in the tank when times get tough.
If we did not offer this program, what would be their alternative?
This is why I am perplexed by a
If overdraft users generally know the fees they will incur, who benefits from these disclosures? More importantly, will users of the data analyze it appropriately? Ironically, the op-ed from the former credit union CEO demonstrates the problem with these disclosures. He states that in the second quarter of 2024, credit union overdraft fees totaled $3.2 billion. That figure is over three times higher than the actual amount.
But as member-owned not-for-profits, credit unions by their nature distribute earnings to their membership before it hits their bottom line. Comparing overdraft fees to net income in order to gauge institutions' overdraft reliance is an approach that even the CFPB rejects as "
More important than the misinterpretation of the data is the claim that credit unions are exploiting members when they provide them with overdraft services. That simply does not align with the broader data, which consistently shows that credit unions provide a more member-centric approach to financial services. It also fails to recognize the fact that in the absence of overdraft, credit union members would be forced to resort to costlier alternatives from those who truly are looking to exploit those in need.
Additionally, the piece fails to acknowledge the essential role credit unions play in fostering financial inclusion, particularly for underserved communities. Many individuals rely on credit unions precisely because they offer lower fees, more flexible lending options and a level of personalized service that large banks do not provide. A recent
As long as overdraft exists, it will have its critics, many of whom are well-intentioned. But the cumulative evidence of research and experience shows that overdraft is a necessary and beneficial service, especially in the hands of a credit union. Rather than engaging in alarmist narratives, discussions about credit unions should be grounded in a nuanced understanding of their role in the financial ecosystem and the economic reality of their members.
