CFPB and Credit Unions Clash on Fee Income Reporting and Protections

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The fight against overdraft and NSF fees has been a popular topic in the financial industry over the last few years, as the Biden Administration has worked to eliminate those it considers “junk fees” in the name of consumer protection. Opponents argue that financial institutions such as credit unions have relied on this income for too long and have reached near-predatory levels with the amount and frequency at which they charge.

Credit unions and trade organizations have been staunchly against these measures, stating that overdraft fees protect consumers by allowing them to complete transactions—such as paying rent, buying groceries, getting gas, etc.—even when they lack the funds. To remove these fees would prevent consumers from making these purchases and ultimately put them at risk while also significantly lowering income for the financial institution, they say.

Now, in a recent report on overdraft and NSF fee income, the Consumer Financial Protection Bureau (CFPB) reports that since 2019, overdraft and NSF fee revenue have dropped a whopping $6.1 billion ($4 billion for overdraft and $2 billion for NSF fees respectively) as a result of the organization’s measures to protect low-income families. A decrease of over 50% to pre-pandemic levels and a drop of 24% from 2022 to 2023.

Additionally, the report notes that since the CFPB heightened its protections in 2022, financial institutions “agreed to refund over $240 million to consumers—approximately $177 million in unfair unanticipated overdraft fees charged on transactions that were authorized when the consumer had sufficient funds and approximately $64 million in NSF fees charged on the same transaction that already incurred an NSF fee when it was previously declined.”

It’s important to note that this report does not include credit unions as they have not been mandated to report their fee income, unlike banks. However, that is now changing, as credit unions—as of March 31st, 2024—with more than one billion in assets are required to report this income on their call reports, at the objection of the credit union industry.

While the CFPB estimates this will apply to approximately 400 credit unions, advocacy organization America’s Credit Unions is fiercely against the move, arguing that fee income is not subject to the Freedom of Information Act because it is confidential business information protected under the FOIA exemptions. The NCUA disagrees, as Chairman Todd Harper spoke out in early February in favor of the change.

America’s Credit Unions Chief Advocacy Officer, Carrie Hunt, recently wrote a letter to the NCUA about the new requirements, urging them to reconsider. In her letter, she asked for clarification on under what authority the NCUA is releasing call report data and expressed concern that the results would be misrepresented and harm the reputation of credit unions overall.

“There are significant reputational risks that are likely to quickly arise with the public disclosure of such information,” said Hunt. “As we have already seen following the release of certain information on overdraft and NSF fees charged by California state-chartered credit unions and banks, this information is likely to be spun in a misleading and potentially inaccurate way, resulting in irreparable harm to the positive reputation credit unions have worked so hard to achieve.”

The NCUA has yet to respond, and considering the new changes are already in effect, it is unlikely they will be reversed before the fee income is made public.

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