NCUA Addresses Fee Practices
The NCUA put federally insured credit unions on notice in mid-December by issuing a Letter to Credit Unions, titled Consumer Harm Stemming from Certain Overdraft and Non-Sufficient Funds Fee Practices. The letter notes that credit unions that assess overdraft or NSF fees that members cannot reasonably anticipate or avoid may be exposing themselves to "heightened reputational, consumer compliance, third-party, and litigation risk."
Here are a few practices the agency felt created exposure:
- Authorize Positive, Settle Negative Overdraft Fees
- Multiple NSF Representment Fees
- Returned Deposited Item Fees; and
- Other Overdraft Practices, like insufficient or inaccurate fee disclosures and ordering transactions to maximize fees
The letter suggested risk management principles a credit union with an NSF or overdraft program could consider to reduce the risk of legal challenges. They noted NCUA does not expect credit unions to cease offering overdraft programs designed to assist your members in managing cash flow needs, and also noted supervisory or enforcement actions they need to take could include restitution to harmed members.
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