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Diana Dykstra, President and CEO of the California and Nevada Credit Union Leagues.
Diana Dykstra, President and CEO of the California and Nevada Credit Union Leagues.

No ‘Junk’ in Overdraft Fees; Only Transparent Consumer Options

In today’s discourse surrounding “junk fees,” it’s imperative to separate the sensational misconceptions surrounding overdraft fees at credit unions from the broader narrative. Contrary to the distorted portrayals by guest commentators and consumer “advocates” in the news media, credit unions are fundamentally different from other financial institutions associated with questionable “junk fee” practices.

All financial institutions are obligated to provide transparent information about overdraft fees, empowering consumers to make informed decisions aligned with their preferences and financial habits. It is disheartening to witness the misuse and misinterpretation of overdraft data, which has been leveraged to cast credit unions in an undeserving, negative light. Such tactics divert attention from the real financial service predators for which credit unions are a cherished alternative.

Opting-in for overdraft protection is a valued and worthwhile choice available to credit union members, providing a crucial safety net during unforeseen financial challenges. Fortunately, transparent and proactive credit union overdraft programs provide members a financial lifeline by covering expenses in times of need, while ensuring members avoid additional charges by allowing opportunities to cure items. According to data from the Credit Union National Association (CUNA), credit unions nationwide exhibit a high degree of flexibility and consumer-centricity in their unique approach to overdraft fees on behalf of their members:

  • 98 percent waive overdraft fees on a case-by-case basis.
  • 78 percent intervene when a member engages in frequent overdrafts.
  • 71 percent provide targeted outreach or education to members who miss payments.

Here’s what also separates credit unions above financial predators in the overdraft space: they offer overdraft protection exclusively to member-owners who opt-in to a program, ensuring members have control over their choices. These programs undergo rigorous consumer protection, oversight, and regulation by state and federal regulators.

Despite criticism of credit union overdraft fees as greedy and usurious charges — or even equating them with “junk fees” — it is important to recognize their role in promoting responsible financial behavior, supporting stability, and offering emergency financial support. Looking out for the best interests of their members exemplifies the pro-consumer nature of the credit union-member relationship, which is unique in the financial services space. Consumers, armed with an understanding of the purpose and benefit of these programs and associated fees, can make informed choices about their banking relationships and strive for long-term financial wellbeing.

Regrettably, certain consumer “advocates” persist in launching misleading and biased attacks against credit unions, oftentimes to promote their own interests. In contrast, credit unions, as community-based and member-owned financial cooperatives, operate for the mutual benefit of their members, not shareholders. Their commitment to the best interests of members, regardless of their financial situation, positions credit unions as sincere, unequivocal consumer advocates.

When it comes to all the hype on “junk fees,” credit unions stand out as beacons of genuine consumer advocacy by offering financial security and transparent terms with their overdraft programs, providing services that align with the needs and requests of their members. As credit unions continue to prioritize the financial wellbeing of their members, they reinforce their role as true defenders of all consumers in our financial ecosystem.

Diana Dykstra
President and CEO
California and Nevada Credit Union Leagues

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