America’s Credit Unions Flags Consumer Consequences of CFPB’s Overdraft Proposal

America’s Credit Unions sent a letter to the CFPB vehemently opposing the bureau’s proposed rule related to overdraft fees as it will harm community-based credit unions and their members. The proposal would amend Regulations E and Z to update regulatory exceptions for overdraft credit provided by “very large” financial institutions.
 
America’s Credit Unions is especially concerned that the bureau’s proposal:

• Harms consumers who rely on overdraft protections to manage their finances.
• Credit unions are committed to supporting their members’ financial well-being and supporting financial literacy to help consumers escape cycles of debt. According to America’s Credit Unions’ 2024 Consumer Pulse Survey, 86% of credit union members believe their credit union “cares about my financial well-being” and 89% said their credit union “has positively impacted my financial well-being.”
• Exceeds the bureau’s statutory authority by misinterpreting legal provisions to apply their concepts to overdraft and impermissibly expanding definitions to bend the rule to meet their needs.
• Is an attempt to socialize financial services as it would impose a one-size-fits-all charge on all account holders, regardless of their overdraft usage, without considering proper incentives and consumer behaviors.
• Will have broad, industry-wide ramifications as the marketplace and consumers react to constraints on larger entities and pressure smaller institutions to make changes they can’t afford in order to stay competitive.
• The most recent NCUA call report shows only 21 credit unions with assets greater than $10 billion compared to 160 banks within that category.

 
It’s also important to note the Federal Reserve Bank of New York’s new report that highlights the bureau’s substandard efforts to understand the issue: The bureau held interviews and focus groups with only 36 low- and moderate-income households to learn about their experiences with overdraft credit.
 
America’s Credit Unions will continue to fight for the 140 million Americans who choose credit unions as their trusted financial institution and provide clear disclosure for fees.
 
Read the letter.

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