WASHINGTON—The Defense Credit Union Council is pushing back against Sen. Elizabeth Warren’s scrutiny of overdraft practices, telling the Massachusetts Democrat that her recent criticisms overlook the core differences between credit unions and the big banks she often targets—and risk undermining services that military families rely on.
As CUToday.info reported, citing an American Banker story, Senate Democrats, led by Banking Committee ranking member Elizabeth Warren (D-MA) are pressing credit unions to reassess their overdraft practices.
In a detailed letter to Warren Tuesday afternoon, DCUC emphasized first that credit unions are fundamentally different from the big banks often associated with “exploitative mechanisms.”
“Credit unions operate as member-owned, not-for-profit cooperatives – every member is a part owner, and there are no outside shareholders to demand profit maximization,” wrote DCUC Chief Advocacy Officer Jason Stverak. “This structure means that any earnings are returned to members in the form of lower loan rates, higher savings returns, or reduced fees. It also means that credit unions’ incentives are aligned with consumer interests, not with extracting ‘junk fees.’”
We take pride in this alignment and in the trust our member-owners place in us to provide fair, affordable financial services. We agree wholeheartedly that credit unions must continually earn that trust through consumer-friendly policies.
Stverak acknowledged that DCUC agrees that no consumer should be caught in an unending cycle of fees.
“Credit unions strive to design overdraft programs that avoid punitive outcomes and truly assist members who occasionally need a small advance. To that end, credit unions have implemented numerous consumer safeguards and best practices for overdraft services,” he wrote.
Stverak outlined typical credit union practices regarding overdrafts, stating CUs:
- Require explicit opt-in consent. Members must affirmatively enroll in overdraft coverage for debit transactions, so no one is surprised by an overdraft fee
- Provide real-time alerts and low-balance warnings. Members receive notifications (via texts, apps, or emails) when their account balance is low or when an overdraft occurs, helping them stay informed
- Limit the number of fees. Daily caps are commonly in place (e.g. no more than 3–5 overdraft fees per day), preventing excessive fee accumulation
- Require timely repayment plans. Overdraft balances must be repaid within a set time (often within 30 days), which protects members from snowballing debt and forces a reset if problems persist
- Offer personalized counseling and financial education. If a member is frequently overdrafting, many credit unions reach out with one-on-one financial counseling or enrollment in free budgeting courses to help break the cycle
These practices, which Stverak noted operate within a federal regulatory framework, demonstrate that credit union overdraft programs are markedly different from the “predatory” caricature.
“Our programs are transparent, reasonably priced, and designed to be a stopgap – not a trap. We also routinely waive or refund fees in cases of error or hardship; the goal is to help members, not profit from misfortune,” Stverak wrote.
Stverak pointed out many credit unions have also reduced or eliminated various fees in recent years.
“In fact, industry data confirm a significant downward trend in overdraft fee revenues as institutions reform their practices – banks and credit unions over $1 billion in assets saw total overdraft/NSF fee income drop from ~$11–12 billion per year pre-pandemic to about $5.8 billion in 2023,” Stverak wrote.
Where DCUC said it has concerns, is with one-size-fits-all mandates that do not account for the realities of providing sustainable financial services.
“The now-rescinded CFPB rule capping most overdraft fees at $5 is a case in point. While we absolutely support sensible consumer protections, this rule was, in our view, a misguided approach that would likely have hurt consumers more than it helped,” Stverak stated.
Stverak wrote that DCUC “respectfully” defends the record of credit unions in protecting consumers even as they offer overdraft services.
“Credit unions are not perfect, and we acknowledge that we must remain vigilant to ensure all fees are justified and reasonable. But we reject the characterization that credit unions as a whole are engaging in “predatory” fee practices,” he said.
Stverak asked for a meeting with Warren to discuss these issues in detail and identify “constructive paths forward.”