ALEXANDRIA, Va.—As the NCUA considers a proposed rule to remove the 45-day limit in its requirements for an overdraft policy in the agency's lending rule, NAFCU offered the association's support, stating, "Replacing this timeframe with a credit union-determined timeline that is reasonable and consistently applied as this will provide credit unions with appropriate flexibility to assist their members."
The NCUA tabled an interim final rule on the same proposal in 2020; it was approved 2-1 as a proposed rule during December's board meeting. Casting the dissenting vote was then board member Todd Harper, who has since been elevated to chairman. The votes in favor of the proposal were cast by then Chairman Rodney Hood and Board Member Kyle Hauptman. Both remain on the board.
"NAFCU and our members have long advocated for NCUA to eliminate this required timeframe as it creates operational burden, is inconsistent with generally accepted accounting principles (GAAP), and poses no benefit to credit union members," wrote Elizabeth LaBerge, NAFCU's senior regulatory counsel, in a comment letter.
Under the existing overdraft policy, federal credit unions must adopt a 45-day maximum time limit for a member to either deposit funds or obtain an approved loan from the FCU to cover each overdraft. In addition to removing the requirement, the proposal would insert a cross-reference to the overdraft provisions of Regulation E for transactions covered by that rule.
Time Limit Too Restrictive
In NAFCU’s letter, LaBerge argued the time limit restricts credit unions' ability to work with members. She highlighted how credit unions have stepped up amid the coronavirus pandemic to help members facing financial hardships – including by waving fees such as overdraft fees – and said a broad, mandated overdraft policy could limit the availability of these programs, which are intended to ensure members have access to credit union services when they need it most.
"FCUs have long reported confusion, operational burden, and member service difficulties regarding the lending rule’s requirement that negative balances be resolved by depositing funds or establishing a loan within 45 days," LaBerge said. "The misalignment between the 45-day timeframe and GAAP’s 60-day timeframe for determining whether a negative balance is collectible is counterintuitive and creates confusion for FCU staff in establishing procedures for handling these accounts. The 45-day timeframe forces FCUs to treat members more harshly than the credit union’s own balance sheet."