WASHINGTON–At the same time America’s Credit Unions is hosting its GAC, where sessions related to fees are on the agenda and the subject of comments from the main stage, Consumer Reports has published a new report headlined, “When It Comes to Junk Fees in Banking, Credit Unions Can Be Among the Worst Offenders.”
The report doesn’t actually cover much new ground, as it is primarily based on a 2023 report that CUToday.info has extensively covered. Nevertheless, Consumer Reports states, “Some of these nonprofits derive a surprisingly large share of their income by penalizing customers for overdrafts.”
It goes on to state that as other financial institutions are eliminating or reducing fees, “one segment of the industry appears to be lagging behind: credit unions.”
Based on California Study
The Consumer Reports story is based on the 2023 report from the California Department of Financial Protection and Innovation which found that the 114 credit unions chartered by the state brought in $250 million in overdraft and NSF fees in 2022, more than three times the $73 million earned that way by the state’s 101 banks.
"The California data reveals stark differences between credit unions and banks, with credit unions making a significantly higher percentage of their income in overdraft fees, in some cases above 10% of total income, while banks averaged less than 0.5%,” said Jennifer Chien, a senior policy counsel at Consumer Reports. “We suspect this pattern likely extends to credit unions across the country.”
Not Supporting ‘Mission’
Consumer Reports, which said credit unions have a “stated mission of improving the financial well-being of their members, often people of modest means,” noted it has frequently recommended credit unions because the earnings they generate are effectively returned to their members in the form of higher savings and lower lending rates.
It further cited a February survey by the CFPB, for example, found that credit unions (and small banks) typically charge eight to 10 percentage points less interest on credit card debt than the 25 largest card issuers.
‘Surprising & Troubling’
“So it’s both surprising and troubling that some credit unions are going hog wild on junk fees, even as many of their larger for-profit counterparts are trying to kick the habit,” Consumers Report said. “This may be the most troubling issue when it comes to credit unions that generate big portions of their earnings through fees. As nonprofit institutions with a responsibility to promote their customers’ financial health, they get a pass on many banking regulations (as well as corporate income taxes). Yet some appear to have built their business models around collecting excessive fees from their most vulnerable consumers.
In this respect, fee income is arguably part of a broader concern: That certain credit unions are exploiting their exemption from banking regulations while behaving more and more like banks….”
CU Group Responds
The piece quotes America’s Credit Unions CEO President and CEO Jim Nussle as saying in response to some of the fee proposals that have been made, “A one-size-fits-all fees structure is counter to the mission of providing consumers pathways to financial stability.”
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