On March 3, the National Credit Union Administration announced that changes would be made to the NCUA’s practice of publishing overdraft and non-sufficient fund (NSF) fee income for individual credit unions. The decision was made by current NCUA Chairman Kyle Hauptman, without the support of fellow board members Todd Harper and Tanya Otsuka.
The prior policy required federally insured credit unions with more than $1 billion in assets to disclose both overdraft and NSF fee income. The data was then made available to the public for both each individual credit union, as well as aggregate data. This data, as well as data on California state-chartered credit unions, has since been featured in articles and campaigns criticizing the industry for “predatory” practices.
With the changes Hauptman announced, NCUA will continue to collect the data as part of the examination process, and “continue to publish overdraft and NSF fee income data in the aggregate once updates to its examination system are complete.”
Said Chairman Hauptman, “There is a well-intentioned movement aimed at protecting consumers from excessive fees, which is something we all support. However, we must also consider the unintended consequences of such policies. In this instance, the previous data collection policy incentivized credit unions to avoid serving the needs of low-income and underserved communities. These fees can be the best option in a bad situation, saving money and protecting individuals’ credit scores. Overdraft also protects people from much higher costs imposed by their local governments.”
“Our regulatory framework should protect consumers from predatory practices without depriving them of the financial tools they need to navigate their lives,” he continued. “The appropriateness of overdrafts and NSF fees charged is a matter between a credit union and its member-owners who ultimately determine how their credit union is run.”
Fellow members of the NCUA Board, however, disagree with the decision that was made. In a statement made by Board Member Tanya Otsuka, she criticized the decision, the underlying reasoning—arguing there is no data to support how the disclosure resulted in fewer services for low-income or underserved members—and the way the changes were made “unilaterally.”
“Transparency is vital for promoting fair competition within the financial system,” Otsuka said. “Limiting access to individual credit union data does not help consumers, encourage the chartering of de novo institutions, or reduce regulatory burden on small cooperatives, which were exempt from the requirement to report these data. It just enables larger institutions that rely heavily on fee income to operate in the shadows, resulting in less competition and less choice for consumers, and places institutions that stay true to the principles of the credit union movement at a disadvantage.”
Former Board Chairman Todd Harper seconded Otsuka’s sentiments in his own statement arguing, “by unilateral action by the Chairman, credit union member-owners and the public will now no longer have access to this important information. If credit unions are to live up to their statutory purpose of supporting the financial needs of ‘people of modest means and the credit union movement’s oft-touted ‘people-helping-people’ philosophy, then credit union member-owners should have access to this basic market information, so they can make better decisions about how and where to deposit and access their hard-earned money.”
Credit unions are required to disclose their fee schedules to members, but otherwise have not had to share the data on the total amount of fee income generated from disclosed programs.
In a February 28 interview with Capitol Account, Hauptman was asked, “You’re now the chairman of a three-person board, with the other two members being Democrats. How are you approaching it?” Hauptman responded, “This place wasn’t all that partisan to start with, but it definitely changes some of my priorities in terms of what’s feasible. There’s some internal things that I think we can get done. I’ve noticed with all the executive orders, talking to other agencies, that some of them vest a lot of power in the chair. [The NCUA] is more board-centric.” Hauptman’s subsequent decision to reverse course on the policy against the wishes of his fellow board members may have some wonder how board-centric.
