WASHINGTON—CUNA is asserting that a new study from the Pew Charitable Trust misunderstands CU overdraft programs and the regulations that apply to them.
The Pew study, according to CUNA, makes sweeping conclusions about overdraft services for all consumers based on a small number of hand-picked banks.
The report, titled “How a Set of Small Banks Compares on Overdraft,” analyzes overdraft programs, fees and terms at 45 banks. CUToday.info has coverage here.
“Despite not studying credit union overdraft services or credit union member use of them, Pew includes recommendations that impact the choices of credit union members,” stated CUNA.
“The study ignores or misunderstands how certain regulations apply to overdraft services. It also fails to consider how credit unions differ from banks when offering overdraft services, and assumes they are of little to no benefit to consumers,” said Ryan Donovan, CUNA chief advocacy officer, in a statement. “Americans are tired of D.C. lawyers telling them what they do and do not need. Studies like this feed the enmity consumers have toward Washington and, in this case, threaten the availability of products that meet consumer needs in the market.”
A July 2015 CUNA survey of consumers found that 72% of all credit union members and 63% who have used overdraft protection in the last year prefer to have consumers “make their own choices about overdraft protection and continue to have options available without new federal government restrictions.”
The Pew study also recommends that regulators should enable banks and credit unions to offer affordable small-dollar loans in place of expensive overdraft penalty programs.
“We agree with Pew that credit unions should be able to offer small-dollar loans, but disagree that they need one-size fits-all regulations addressing a nonexistent problem with credit union small-dollar lending, to serve their own members,” Donovan added. “Credit unions already offer consumer-friendly, small-dollar loans, and arbitrary policies constricting their ability to do this make it more difficult for credit union members to be able to continue to have options for safe and affordable credit.”
CUNA pointed out that the Consumer Financial Protection Bureau has indicated it will begin pre-rule activity on overdraft products and services starting in early 2017, with additional research focusing on smaller financial institutions to take place.
CUNA and state credit union leagues have met with the CFPB a number of times, most recently in November, to discuss how consumers use overdraft services, and why many prefer and choose to use the service.