BIRMINGHAM, Ala. – As the CFPB focuses on overdrafts, former NCUA Chairman Dennis Dollar is hoping the agency does not send the credit union business model back in time.
The Dollar Associates principal told Credit Union Journal he has concerns regarding potential CFPB overdraft regulations.
“The CFPB has made it clear they will take another look at overdraft programs, and my fear is that nothing good can come of that – not for the financial institution nor the consumer. In an attempt to protect the consumer – more than the consumer wants to be protected – the CFPB may drive a very good cash management tool out of the system.”
Dollar asserted that if the CFPB comes back with tough guidelines that cap overdraft fees at $5 and limit total overdrafts assessed per consumer to six per year, community banks and credit unions will have to move away from offering the service. “We will simply revert to bouncing checks again, return to the era of the NSF fee, prosecute bad check writers, and have people put groceries back on the shelves because the transaction was turned down.”
But that is a worst-case scenario, and Dollar hopes the CFPB will focus less on price fixing and more on rules that will help consumers understand and utilize overdraft programs of their financial institutions. “My hope is they will stay away from price fixing and numerical overdraft limits and will focus efforts on disclosure and consumer education – so that when people are swiping or writing an overdraft they know what they are doing, know how much it will cost them, and are comfortable with that.”
Dollar believes if the CFPB limits overdraft fees CUs can, conceivably, make up a drop from their current $25 average overdraft fee to $15 by increasing penetration of existing members. Dollar pointed out a great deal of room exists for credit unions to increase the number of services per member, especially checking, and boost the number of debit transactions, as well.
“Credit unions do not have to convince someone of what a great deal the credit union is,” said Dollar. “They simply have to persuade members who already understand how great a credit union is to use more services.”