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This podcast provides you the ability to listen to new regulatory guidance issued by the National Credit Union Administration, and occasionally the F D I C, the O C C, the F F I E C, or the C F P B. We will focus on new and material agency guidance, and historically important and still active guidance from past years that NCUA cites in examinations or conversations. This podcast is educational only and is not legal advice. We are sponsored by Credit Union Exam Solutions Incorporated. We also have another podcast called With Flying Colors where we provide tips for achieving success with the N C U A examination process and discuss hot topics that impact your credit union.
Samantha: Hello, this is Samantha Shares.
This episode covers N C U A Vice
Chairman and Board Member Kyle S.
Hauptman statement on the
agencyâs Collection of Overdraft
and Non-Sufficient Fund Data
The following is an audio
version of that statement.
This podcast is educational
and is not legal advice.
We are sponsored by Credit Union
Exam Solutions Incorporated, whose
team has over two hundred and
Forty years of National Credit
Union Administration experience.
We assist our clients with N C
U A so they save time and money.
If you are worried about a recent,
upcoming or in process N C U A
examination, reach out to learn how they
can assist at Mark Treichel DOT COM.
Also check out our other podcast called
With Flying Colors where we provide tips
on how to achieve success with N C U A.
N.C.U.A.
Vice Chairman Kyle S.
Hauptman Statement on
Nonsufficient Funds (N.S.F.) Fees
N.C.U.A.
Vice Chairman Kyle S.
Hauptman during a meeting of the N.C.U.A.
Board.
As Prepared for Delivery
on May twenty second, 20 24
âNo regulation or law passed by
government repeals the laws of economics.â
I would like to use this meeting
to talk about the N.C.U.A.âs recent
decision to require credit unions with
1 billion in assets and over to publicly
publish their revenue from overdraft
fees and fees for insufficient funds.
No one likes paying those fees.
I have paid them myself.
But anytime you wake up and owe
$X that day but have less than
X dollars available, there are
only a series of bad options.
We are pressuring credit unions to
limit what is often the least-bad option
for members under financial stress.
Iâm also aware that there are policy
changes the federal government can
make to reduce those sticky financial
situations, just by making the
existing financial system work better.
As much as one-third of all late fees
and overdrafts could be eliminated
with faster payments that get people
their money quicker, which is something
Senator Schatz of Hawaii often mentions.
The reason for my comments today is
that we have not discussed change in
the fifty three hundred Report at a
Board Meeting, and yet I canât go to
any event without being asked the same
questions: âWhy are you doing this to us?
Do you realize how
harmful it is to members?â
"No one likes paying those fees.
I have paid them myself.
But anytime you wake up and owe
$X that day but have less than
X dollars available, there are
only a series of bad options."
My answers are, I wish the N.C.U.A.
was not doing this â especially on such
short notice â and finally yes, I do
realize how harmful it is to consumers.
I found out about this burdensome
requirement in January.
In lieu of repeal, I have suggested
several ways to make it less
damaging to both credit unions
and to the Share Insurance Fund.
For example, the same data
could be collected in a manner
where itâs available to N.C.U.A.
examiners and we only
publish aggregate data.
We could also listen to those pleading
for adequate time to prepare, and
not publish the data until next year,
especially since itâs been harder than
expected to figure out what numbers
are to be used for each category.
All my ideas were rejected.
Credit unions will now face reputational
risk for data that neither the N.C.U.A.
nor the credit union knows to be correct.
So, we are now yet another agency
mathematically incentivizing institutions
to avoid serving low-income people.
This policy is very clear:
donât serve the underserved.
We are now working against the Federal
Credit Union Act, which states credit
unions are âto create creditâ¦for those
of modest means.â Well, itâs not the
rich that are going to worry about
overdraft protection being removed.
Itâs not those with secure, high-paying
jobs that will suffer from a further
reduction in offers for âfree checking
accounts.â And make no mistake, the
N.C.U.A.âs requirement is designed to
pressure those fees downward, since one
of the main reasons credit unions want
more time to comply is to lower these fees
and to try to raise revenue in other ways
and re-evaluate their business models.
We have seen this movie before.
In 2010, the Dodd-Frank Act
reduced access to free checking.
The bill had a provision on debit cards
that contained government price-setting, a
provision that mathematically made it less
profitable to serve low-income people.
The outcome was as painful as it was
predictable: âfree checkingâ fell
away significantly as new requirements
kicked in for direct-deposits,
higher minimum balances, etc.
Anyone who canât meet those requirements
has to pay monthly account fees or
lose access to the banking system.
Doesnât it seem odd for someone to support
the regulations that make it infeasible
to serve low-income people, and then talk
about âfinancial inclusionâ and lament the
millions of Americans who are unbanked?
It reminds me of the story about the guy
who killed his own parents and then asked
for leniency because heâs an orphan.
"Thatâs the real-world reality
people live in every day."
Can we guarantee the SIF is
better off because of this?
Nope.
And yet we are adding regulatory burden.
But two beneficiaries of this misguided
interference are two interest groups:
1) those who benefit politically, and
2) members of the media, who get to
write click-bait articles that are often
devoid of financial or business literacy.
We have already seen this happen.
It goes without saying that none of
the people supportive of these policies
will be there with their own money to
you offer a better deal when youâre
a few bucks short and desperately
want to avoid a 500 dollar late fee.
Thatâs what will eventually happen.
Overdraft protection, in
particular, will become less common.
Overdraft is when a credit union
pays part of your bills for you when
your account doesnât have enough.
Anyone at a banking institution
will tell you the most distraught
customers are not those whose bills
were paid via overdraft, much as
they may not like the 30 dollar fee.
Nope, the distraught customers are
those customers upset that a bill
wasnât paid due to insufficient funds,
forcing them to pay much higher costs.
Anyone would rather pay 30 dollar
than a 500 dollar late government fee.
What about someone in my position, a
few years ago, who owed four thousand
dollar to my state government,
and was forced to pay one thousand
dollars extra for being one day late.
If my account was a few bucks short of
four thousand dollars, would I rather
pay a 30 dollar overdraft fee or the
extra 1,000 dollars to the government?
Years ago, I was trying to live in
an expensive city on 27,000 dollars a
year salary while paying student loans.
I went to go to work and saw that my
car was gone and called the police.
Turns out it was towed
for late registration.
Back then, I was constantly
juggling payments trying to avoid
the highest costs of being broke.
The highest costs were, and are,
invariably charged by the same governments
that lecture the private sector.
Governments charge fees and use
coercive tactics that are significantly
worse than anything labeled a
âjunk fee.â And yet, we rarely hear
about that from self-proclaimed
âconsumer protectionâ advocates.
"We canât pretend that government
artificially forcing down
the price of something wonât
have major negative effects.
We also canât pretend that it
makes sense for the N.C.U.A.
to make interest rate risk our
top Supervisory Priority the same
year weâre pushing credit unions
away from non-interest income."
Anyway, about my car that was towed: I
wound up paying 6 times the registration
fee, after paying the government
for impound costs and other charges.
But I was lucky, I had a salaried
job and could call work and said
I couldnât come in that day.
Millions of Americans in that
situation would lose a dayâs pay.
Then there are those whose government
had towed their car or put a boot
on it, causing them to be late to
work and thus violate their parole.
Of course, you would pay
30 dollar to avoid that.
Thatâs the real-world reality
people live in every day.
Anyone whose account is slightly short
of money would rather pay a 30 dollar
overdraft fee than miss the child support
payment that is the only way they can get
visitation to see their kid that year.
Thatâs the real world.
I do agree there are only bad
choices for those short of cash.
There may be policies to make life
more affordable and less inflationary.
But the N.C.U.A.âs recent
policy on overdraft and N.S.F.
fees is not among them.
We canât pretend that government
artificially forcing down
the price of something wonât
have major negative effects.
We also canât pretend that it
makes sense for the N.C.U.A.
to make interest rate risk our
top Supervisory Priority the same
year weâre pushing credit unions
away from non-interest income.
Because no regulation or law passed by
government repeals the laws of economics.
This concludes the statement.
If your Credit union could use assistance
with your exam, reach out to Mark Treichel
on LinkedIn, or at mark Treichel dot com.
This is Samantha Shares and
we Thank you for listening.