MCUL Comments on Overdraft Protection; Overdraft Survey Released (Misc News: July 23, 2012)
MCUL submitted a comment letter to the Consumer Financial Protection Bureau in response to the CFPB’s request for information regarding overdraft programs.
Click here to read the comment letter.
The CFPB is reviewing existing regulations and supervisory guidance issued by various regulators pertaining to the use of overdraft programs by financial institutions, and will use the information provided to support this review.
“MCUL strongly urges the CFPB to consider the fact that overdraft protection programs can actually save consumers money, as consumers are spared the high fees that merchants charge for returned payments,” the letter states. “Overdraft protection programs also afford consumers the opportunity to purchase necessary products and services without the fear or the embarrassment of rejection at the point of sale, and enable consumers to process necessary payments (e.g., heating bills, car and mortgage payments).”
MCUL also urged the CFPB that, in the event this issue becomes more heavily regulated, that such regulations would be reasonable.
In addition to the Comment Letter, MCUL has issued an overdraft survey to gauge how credit unions in Michigan are handling the issue, and to better respond to any proposed rules related to overdraft programs by the CFPB. The survey can be found here.
Last week, Michigan credit union leaders were able to discuss the overdraft issue directly with CFPB leaders, including Director Richard Cordray, at an informal meeting in Detroit.
At the meeting, MCUL & Affiliates CEO David Adams told bureau leaders that credit unions are also concerned about government efforts to regulate overdraft privileges.
“When the government tinkers with pricing, it has unintended consequences,” Adams said.
Adams also urged the CFPB not to take away legitimate sources of revenue since retained income is essentially credit unions’ only source of income.
Lon Bone, vice president of public relations for Genisys CU, said the key to overdraft is letting people know when they are about to incur an overdraft charge and helping them avoid it. Bone said Genisys offers e-alerts to let people know when their account balance dips below certain levels.
“That’s an appealing practice,” Cordray said.
Bone added that a simple disclosure works best, preferably on the statement, which saves the cost of a separate mailing and consolidates information members need about their accounts.