NAPLES, Fla.–NCUA Chairman Todd Harper told defense credit unions here he believes the overdraft fee practices of some federal credit unions are “fundamentally detrimental” to members and “inconsistent with the definition of federal credit union in the Federal Credit Union Act.”
Specifically, said Harper, the portion of the FCU Act that defines a credit union as a “cooperative association organized ... for the purpose of promoting thrift among its members and creating a source of credit for provident or productive purposes.”
“Overdraft fee programs can make it harder for members to regain their financial footing, and households hit by persistent overdraft fees often have their checking accounts closed,” Harper told the Defense Credit Union Council’s (DCUC) Annual Conference. “This, together with Black and Hispanic consumers being disproportionately harmed by overdraft fees, leads to financial exclusion, not financial inclusion. The pain for these communities is real. That’s why I am pleased to see credit unions and other financial institutions stepping up to eliminate or significantly decrease their overdraft fees. I encourage more credit unions to do the same so that we can help credit union members who are in harm’s way.”
As CUToday.info has reported, overdraft fees are the subject of new legislation in Congress, while Alliant Credit Union recently announced it is eliminating its overdraft fee and University of Wisconsin CU said it is reducing its fee to $5.
‘Solid Footing’
Meanwhile, Harper said the bigger picture shows the nation’s CUs remained on “solid footing” financially during the pandemic.
Noting it was his first in-person remarks since CUNA’s GAC in early 2020, Harper told the defense credit unions the outlook for the remainder of the year and into early 2022 is favorable.
“But, I must caution everyone that we are not out of the woods just yet. Credit union performance will continue to be shaped by the fallout from the pandemic and its financial and economic disruptions,” Harper said. “With pandemic-relief efforts like supplemental unemployment benefits, foreclosure prevention programs, and eviction moratoriums coming to an end, many households could face financial stress in the coming weeks and months. This could lead to higher delinquency and charge-off rates and potential losses for credit unions — and even failures.”
Harper said other risks to watch for include an uncertain interest rate environment and the potential for continued elevated insured share growth to place additional stress on credit union capital levels.
The NCUA chairman urged CUs to continue to with members, especially those feeling the brunt of the economic slowdown related to the coronavirus pandemic.
Other Topics Covered
Other points raised by Harper during his remarks included:
Improvements to the NCUA’s Examination Program
Harper said NCUA is improving its supervisory activities through the deployment of MERIT and its associated systems, which together will “modernize the agency’s examination, data collection, and reporting efforts.” MERIT will replace the agency’s long-time AIRES system.
“MERIT will change everything we do in examinations, from how we manage workflow and request documents, to how we evaluate a credit union’s performance and prepare and deliver exam report,” Harper said. “MERIT will also provide us new analytical capabilities that both examiners and credit unions will appreciate.”
Diversity, Equity & Inclusion
Harper said over the last few decades numerous studies have shown that organizations that prioritize the creation of a more diverse and inclusive workplace experience greater staff motivation, better, and more creative problem-solving, improved customer service, innovation, and decision-making, and higher employee retention.
“All of these lead to greater efficiencies and better financial performance,” Harper said. “Unfortunately, far too often organizations treat diversity as simply a human resources issue. To be truly effective, diversity and inclusion requires a commitment to cultural change at every level and must extend throughout the entire organization, beginning at the staff level, then extending to the C-suite, and ultimately, its board.
“Beyond diversity and inclusion, though, we need economic equity and justice, which will help ease the financial impact of COVID-19 and systemic racism on communities of color,” he continued. “By enhancing support for Minority Depository Institutions, enforcing fair lending laws, and advancing initiatives to close the wealth gap, we can address the disparities created by centuries of systemic discrimination and exacerbated by the pandemic. Additionally, we can ensure that the cooperative nature of the credit union system lives up to its mission of meeting the credit and savings needs of consumers, especially those of modest means.
“The Army has a great saying: ‘Diversity is the Force. Equity is the Goal. Inclusion is the Way.’ I love that statement, because each one of us has an obligation to address these issues directly and chart a better course for the future of the credit union system and our country,” Harper said.