CUs Can’t Shy Away From Debate Over Fees

March 28, 2017 at 9:34 am Leave a comment

At the risk of sounding like one of those slightly paranoid armchair media critics and U.S. Presidents who see a nefarious motive behind every critical article, it has been my experience in gathering news for this blog that if the Wall Street Journal is reporting news about credit unions, it typically isn’t good news.

So my ears perked up this morning when my alarm went off and I asked my new virtual best friend Alexia to tell me the news. Her briefing included a report from the WSJ’s News Minute podcast  that credit union overdraft fees have doubled since 2000 and are now almost as high as the same fee charged by banks.

The podcast was referring to an updated study released by Moebs Services that concluded “the average overdraft fee at a bank is now $30, up 50% from $20 in 2000. And credit unions, typically applauded for their consumer-friendly practices and prices, aren’t far behind. The average overdraft fee at a credit union almost doubled over that period, reaching $29, up from $15 in 2000.” Moebs said it based its findings on an analysis of more than 3,800 banks, credit unions and other financial institutions.

The report comes on top of anecdotal evidence that larger credit union overdraft practices are becoming increasingly tempting targets for class action lawyers.

For the record, when it comes to overdraft fees I have drunk the Kool-Aid. If credit unions did away with overdraft services, your members who utilize them would demand you bring them back. So long as members understand what they are doing they should be able to decide for themselves whether or not an additional fee is worth the convenience of not having to balance the checkbook or finding out that a student loan payment has bounced.

But let’s be honest: Many banks and credit unions are growing more dependent on fees, and this trend is likely to continue. The problem is that consumers expect more from credit unions than they do from banks. They trust the industry. The more headlines that are generated implying that credit unions are just as bad as banks, the more the industry stands to lose.

My suggestion is to employ the “straight face test.” Don’t shy away from explaining to your members not only what fees you are charging but why you are charging them. Explain that a given fee not only makes it possible to provide desired services, but also helps keep the credit union healthy.

If you can’t say this to them with a straight face, maybe a given fee is a little too high after all.


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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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