By Ray Birch
OKLAHOMA CITY, Okla.—One credit union that has markedly dropped its overdraft fee is contending that much of the bad press CUs and ODs are getting is unwarranted, and with many more members now using the service regularly, it is proof of the value of a well-priced overdraft.
In August of 2021, the $1.5-billion WEOKIE Federal CU reduced its overdraft charge from $27.50 to $15.
“Prior to the reduction in fee we had about 3,500 members using the service regularly, and now that number is 4,500,” said CEO Jeff Carpenter. “It is truly a reasonable tool for somebody to use to avoid payday lending. I think there's a lot of bad press with regard to financial institutions and overdrafts—that we’re just money hungry and taking advantage of people, when, in fact, we're not. We're trying to provide a service that’s needed.”
Much of that bad press has come in the wake of a report from California’s state regulator--as CUToday.info has reported here—that revealed just much state-chartered institutions in the Golden State are earning from overdraft fees and NSFs.
That, in turn, led to other negative reports across the country on overdraft pricing and practices.
But Carpenter said the the service critically important to the CU’s mission of improving members’ financial lives.
“For a long time I was never a huge fan of overdrafts,” said Carpenter. “But what I've come to appreciate over the last five years is that our members really depend on that service, and the service truly prevents them from ending up in payday loans and some other challenging situations. We can see that overdrafts, when used responsibly, are a life-saving device for members in terms of their financial security.”
A Revenue Offset
Carpenter said WEOKIE’s board in 2021 unanimously approved the projected reduction of $1.5 million in annual revenue from the move as a giveback to members who need the service the most. He added, however, the boost in usage has reduced what the CU had projected it might lose in revenue.
WEOKIE, too, is marketing the lower overdraft price to the community and highlights it with an annual savings tracker on its website that updates just how much the credit union is giving back to members each year.
The Marketing Message
Marketing VP Jennifer Curtis said the credit union, too, began to market the service and lower price.
“It's so valuable that we knew we needed to get the message out to the membership, to show the value of it, how it can be used responsibly, and how impactful it could be just on their monthly budget,” Jennifer said.
Curtis also believes the move, along with the publicity, separate WEOKIE from other FIs in its market.
“We hear that through our frontline employees all the time,” she said.
While WEOKIE looked closely at its costs related to its overdraft program, Carpenter acknowledged with all the variables that come with the service it is dif
Jeff Carpenter
ficult to determine the expense to the CU from an overdraft. But the CEO said he feels his CU is breaking even with ODs.
Constantly Monitoring Activity
Carpenter told CUToday.info WEOKIE is constantly monitoring members’ usage and behaviors related to overdrafts. In cases where it believes a member may be in trouble, it counsels them. One member even came to an agreement with the credit union that it would be best for the CU to not offer overdrafts to the person.
“A good example of how we work with members who use the service is our member named Daniel. He reached out to me,” recalled Carpenter. “He shared that he and his wife were struggling, but working to get back on track. We leveraged the opportunity to coordinate a meeting with the husband and wife with one of our certified financial counselors. In the end, we had some tough conversations, and we followed with a consolidation loan and the elimination of the courtesy pay program for them at their request.
“We are committed to our members’ financial future and for some that means occasional access to our ODP. For others, it is best to not have that as an option.
“I'm not going to lie. At one point I was like, we’re playing mom and dad here,” continued Carpenter. “We all agree here that discipline is really important. And if a member is using overdrafts too much as a crutch, we work with them to get their house in order.”
Strong Feedback
Carpenter said WEOKIE has seen extremely positive member feedback from its decision to drop the fee.
“The move also reduced the number of calls from members asking for fee refunds and general complaints about courtesy pay fees being added to their accounts,” he said. “We’ve also received calls into the contact center asking our agents to pass along a thank-you to management for making this change. I think we’ve found the right pricing—although, we haven’t ruled out further reductions.”