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SBC discusses overdraft programs during hearing
Senate Banking Subcommittee on Financial Institutions and Consumer Protection met Thursday to examine overdraft fees. Ahead of the hearing, NAFCU Vice President of Legislative Affairs Brad Thaler wrote to the committee expressing that although the association supports a fair, transparent, and competitive market for consumer financial services, increased scrutiny or legislative efforts to eliminate overdraft protection programs would likely result in significant negative impacts on borrowers and credit unions.
Thaler noted that credit union members who benefit from courtesy pay or overdraft protection programs do so willingly and with full disclosure of the program’s costs and features. The opt-in feature for debit and ATM overdrafts has given consumers “more control over the overdraft rule’s notice requirements and helped consumers to better understand the cost of overdraft programs,” added Thaler.
During the hearing, Ranking Member Thom Tillis, R-N.C., noted that market powers of competition and innovation have changed their ways regarding overdraft programs and how consumers are well aware of the disclosures when opting into a program.
Of note, Aaron Klein, Senior Fellow in Economic Studies at the Brookings Institutions, argued that credit unions should disclose overdraft data just like banks. In addition, Tillis pointed out that many financial institutions, like credit unions, have been able to reduce the usage of and fees for overdraft programs without overburdensome government regulations, and are generally pro-consumer.
NAFCU continues to work with Congress and regulators to ensure credit unions and their members retain the right to use overdraft protection programs.