ALEXANDRIA, Va. – The Center for Responsible Lending, a consumer advocacy funded by Self-Help CU, called on NCUA last week to set new guidelines that would severally restrict credit unions’ ability to charge members overdraft fees.

“NCUA should address abusive overdraft fees, which undermine the effectiveness of any program aiming to help vulnerable members,” said the consumer lobby in a comment letter on NCUA’s proposal on payday alternative loans, known as PALs.

The group, which has been at the center of efforts to curb predatory mortgage lending and high-cost payday lending, urged NCUA to adopt guidelines, as the FDIC has, that would limit what credit unions could do to earn revenue from overdraft.

The guidelines would: bar credit union from manipulating the posting order of transactions to drive up fees; prevent overdraft fees on debit card and ATM transactions; limit overdrafts to six a year; and require that credit union set overdraft fees that are reasonable and proportional to recovering costs for overdrafts.

“Eliminating abusive overdraft programs would go a long way toward making (federal credit union) members less vulnerable to payday loans and other predatory products,” said the Center in its comment letter.

The credit union-backed group was also among a broad coalition of consumer advocaies calling on NCUA last week unions to expand affordable overdraft lines of credit, in lieu of overdraft fee loans they say skirt NCUA’s 18% interest rate ceiling.

“NCUA should also encourage credit unions to offer affordable overdraft lines of credit and to stop circumventing the 18% interest rate cap through unaffordable overdraft fee loans,” wrote Americans for Financial Reform, in a comment letter the payday loan proposal.

“Too many credit unions are making unaffordable short term loans by authorizing overdrafts and charging high overdraft fees,” wrote the coalition. “Reining in those abuses will do a lot more to encourage the development of affordable small loans and overdraft lines of credit than will tinkering with the (payday) loan rules.”

“Credit unions,” wrote the group, “have little incentive to offer alternatives when they are making so much money off of overdraft fees.”

The coalition includes Consumer Action, National Community Reinvestment Coalition, U.S. Public Interest Group, Woodstock Institute, Consumer Federation of America, and the credit union-backed Center for Responsible Lending, as well as 50 other consumer advocacies.


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