NCUA Board Member Todd M. Harper issued the following statement about the agency’s decision to curtail the collection of total overdraft and non-sufficient fund (NSF) fees for federally insured credit unions with more than $1 billion in assets beginning with Call Reports for the first quarter of 2025.
For markets to work efficiently, transparency is needed. That’s a bedrock principle of economics. And, it’s one of the many reasons why credit union member-owners and the public should have clear visibility into the income a credit union generates from overdraft and NSF fees charged to its member-owners.
To advance credit union efforts to benchmark fees against other financial institutions, improve marketplace competition, and increase consumer understanding of the fees they’re charged within the credit union system, the NCUA required federally insured credit unions with more than $1 billion in assets to disclose, separately, income from overdraft and NSF fees beginning with the 2024 first quarter Call Report. With today’s release of the 2024 fourth quarter Call Report results, however, that desirable transparency experiment will regrettably end.
During the last year, we’ve found that reporting institutions have collected $3.8 billion in such fees. Some charged no fees at all. For most reporting credit unions, overdraft and NSF fees accounted for between 2 and 5 percent of revenue. Some outliers charged fees amounting to as much as 18 percent of income. For those billion-dollar-plus credit unions with higher overdraft and NSF fees, we also found that they did not use those fees to subsidize better interest rates or lower other fees.
Federally insured banks with more than $1 billion in assets began reporting these numbers in 2015. Since then, consumers have benefitted as banks have lowered their reliance on such fees. In fact, the Consumer Financial Protection Bureau found that roughly two out of three banks with $10 billion or more in assets have eliminated NSF fees, saving consumers $2 billion annually. Yet, among credit unions with greater than $10 billion in assets, four out of five continue to charge NSF fees. That overreliance on such fees is one of the many reasons why the NCUA began collecting and publicly reporting this data on Call Reports.
But, 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.
While the NCUA will no longer publish overdraft and NSF fee income for individual credit unions on a real-time quarterly basis, the agency will instead collect the data during supervisory examinations. This approach, however, will likely shield credit union members from accessing the information through the Freedom of Information Act. Ultimately, this non-disclosure will result in financial exclusion, especially when one considers that NSF is a fee for not paying for an item.
In my view, the NCUA should restore fee transparency for overdraft and NSF fees on Call Reports. If the Chairman is unwilling to reverse course, then the overdraft and NSF fee data collected in the exam process at individual credit unions shouldn’t be shielded from public release through the Freedom of Information Act. If such data was once already public information, why now sweep it under the rug?
The Chairman also noted that the appropriateness of overdrafts and NSF fees charged is a matter between a credit union and its member-owners. If those member-owners ultimately determine how their credit union is run, then credit union management should make their overdraft and NSF income upon member-owner request.
As a steward of the credit union system and someone whose father and grandfather started credit unions, I strongly believe in the concept of a credit union movement to lift up everyone. But, this unnecessary decision moves that credit union movement closer to an industry, one that’s worse than banks when it comes to fee disclosures. Profiting from consumers’ problems will come back and bite you. America’s credit union member-owners deserve better.