SACRAMENTO, Calif.–Lawmakers in California are considering legislation that would “substantially limit overdraft fees” charged by state-chartered credit unions.
The California Credit Union League is expressing its opposition to the bill.
Under Senate Bill 1075, credit unions could only charge members three overdraft fees per month. The legislation would also establish a five-day grace period for customers to repay their negative account balance and avoid fees altogether, according to KPBS.
“Although overdraft is viewed as a financial tool by credit unions, its fees are inherently predatory,” said Sen. Steven Bradford, who co-authored SB 1075 and testified before the Senate Banking and Financial Institutions Committee, according to the report.
Bill Heads to Committee
The Senate Banking and Financial Institutions Committee passed the bill and it now heads to the Senate Appropriations Committee. It would apply to more than 100 credit unions chartered in California.
League Responds
In a report on its website, the California Credit Union League said “many committee members struggled with the fact that the bill singles out only state-chartered credit unions. Those members were concerned about how this legislation would impact members of those credit unions.”
Committee Member Ana Caballero has urged the bill’s author to work with the league on a solution.
“The League will work with appropriations committee staff to ensure the committee understands the costs of SB 1075 to the State of California,” the league said. It is calling on credit unions to send messages to legislators and said the bill will be its top priority when it hosts its Government Relations Rally next week in Sacramento.
Public Scrutiny
As CUToday.info has been reporting, California’s state-chartered credit unions have been under public and media scrutiny since the release of a report in October 2023 by the California Department of Financial Protection and Innovation (DPFI) that showed how much state-chartered banks and credit unions earned during 2022 from overdraft and nonsufficient funds fees.
That report showed that overall state-chartered CUs during 2022 took in $252 million in overdraft and non-sufficient funds fees, and that 30 credit unions earned half or more of their net profit from just overdraft and NSF fees.
In the wake of the release of that report, the state’s media have followed up with several other pieces, including highlighting pay increases for CEOs at CUs with significant revenue from overdraft fees.
New Report Set to be Released
According to KPBS, the California Department of Financial Protection and Innovation is expected to release 2023 data on overdraft fee revenue at state-chartered credit unions and banks in the coming days.
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