The issue of fees related to overdraft and non-sufficient funds has been a popular topic this year with credit unions – or an unpopular one, depending on your perspective. On December 10 NCUA Chairman Todd Harper issued a letter of guidance on the subject, entitled “Consumer Harm Stemming from Certain Overdraft and Non-Sufficient Funds Fee Practices.” The letter was issued, it explains in the introduction, to “highlight the risks associated with certain overdraft and NSF fee practices and outline practices that may assist credit unions in managing and mitigating these risks.”
What are the key takeaways from this guidance?
Charging multiple NSF fees on the same expense (i.e. charging a fee on a represented item) is likely a regulatory violation, even if that practice is in the credit union's disclosures.
High or no daily limits on the number of ODP/NSF fees that can be charged is likely a regulatory violation.
The NCUA reserves the right to order credit unions to pay restitution to members that were charged inappropriate fees.
But the NCUA is creating a safe harbor for credit unions that self-identify and correct unfair ODP/NSF practices before their next exam.
The NCUA’s letter concludes with an assurance that it “does not expect credit unions to cease offering overdraft programs designed to assist their members in managing their cash flow needs.” Nevertheless, it is a clear message from Harper that credit unions evaluate their overdraft and NSF programs.
With Harper’s tenure near an end and the expectation that the incoming Trump administration will be less consumer-protection focused, credit unions will have to decide whether to jump into action or take a wait-and-see approach.