SAN DIEGO–Credit unions in this state continue to take their lumps in the media over overdraft fees.
As CUToday.info has been reporting, since the release of a report in October by the California Department of Financial Protection and Innovation (DPFI) on revenue earned by state-chartered institutions from overdraft and nonsufficient funds fees the state’s credit unions have been the subject of substantial criticism.
That report found some CUs charging some of the highest fees in the state, with the related revenue comprising a big chunk of overall revenue.
A listing of what some credit unions earned can be found here. Overall, the report found California’s state-chartered CUs generated just over $250 million in overdraft revenue during 2022.
The latest criticism of credit union practices in California was published by Marketplace.org under the headline, “Overdraft Fees, Long Associated With Big Banks, Are Big Business for Credit Unions, Too.”
Member Complains About Fee
The report opened with an interview with a member of San Diego County Credit Union who said his once—positive view of the CU had “started to sour somewhat” after his 20-year-old son had been hit with a $32 overdraft fee.
me one day and he says, ‘What is this $32 fee?’”
The member believes the charges are “excessive,” the report stated.
“It seems like a credit union shouldn’t be charging someone $32 for a transaction that’s, you know, $10 or $20,” the member stated. “Four times a day, maybe even.”
The report then cited a 12-year-old commercial by San Diego County CU that sought to lampoon greedy banks and that uses the tagline, “We’re nothing like a big bank. We’re better,” and then citing the California data to show the $12.7-billion San Diego County Credit Union collected $18 million in overdraft fees last year.
‘Five-Alarm Fire’
The Marketplace.org report quoted Aaron Klein, senior fellow at the Brookings Institution who has been a critic of credit unions and who published a piece on Politico earlier this year headlined, “Credit Unions are Making Money Off People Living Paycheck to Paycheck,” as saying, “Credit unions have largely escaped scrutiny on overdraft by a combination of wrapping themselves in the ‘good guy flag’ as a nonprofit, mission-oriented entity and by not releasing data to the public. Regulators should treat overdraft as the five-alarm fire that is burning through low-income communities and families living paycheck to paycheck.”
CEO Responds
The report did include a counter-argument from Bill Birnie, CEO of Frontwave Credit Union in Oceanside, Calif., who said the fees it charges are not “junk fees” and that for many overdrafts are a “bridge” to their next paycheck.
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