WEBVTT NOTE This file was generated by Descript 00:00:00.460 --> 00:00:02.380 Samantha: Hello, this is Samantha Shares. 00:00:03.040 --> 00:00:07.200 This episode covers N C U A Vice Chairman and Board Member Kyle S. 00:00:07.600 --> 00:00:10.550 Hauptman statement on the agency’s Collection of Overdraft 00:00:10.550 --> 00:00:12.280 and Non-Sufficient Fund Data 00:00:13.015 --> 00:00:15.515 The following is an audio version of that statement. 00:00:16.075 --> 00:00:19.285 This podcast is educational and is not legal advice. 00:00:19.755 --> 00:00:23.705 We are sponsored by Credit Union Exam Solutions Incorporated, whose 00:00:23.705 --> 00:00:26.755 team has over two hundred and Forty years of National Credit 00:00:26.755 --> 00:00:28.665 Union Administration experience. 00:00:29.155 --> 00:00:32.775 We assist our clients with N C U A so they save time and money. 00:00:33.265 --> 00:00:37.225 If you are worried about a recent, upcoming or in process N C U A 00:00:37.225 --> 00:00:41.545 examination, reach out to learn how they can assist at Mark Treichel DOT COM. 00:00:41.975 --> 00:00:46.315 Also check out our other podcast called With Flying Colors where we provide tips 00:00:46.315 --> 00:00:48.895 on how to achieve success with N C U A. 00:00:49.638 --> 00:00:50.438 N.C.U.A. 00:00:50.898 --> 00:00:52.188 Vice Chairman Kyle S. 00:00:52.608 --> 00:00:56.198 Hauptman Statement on Nonsufficient Funds (N.S.F.) Fees 00:00:56.889 --> 00:00:57.719 N.C.U.A. 00:00:58.079 --> 00:00:59.359 Vice Chairman Kyle S. 00:00:59.789 --> 00:01:01.949 Hauptman during a meeting of the N.C.U.A. 00:01:02.419 --> 00:01:02.739 Board. 00:01:03.538 --> 00:01:06.988 As Prepared for Delivery on May twenty second, 20 24 00:01:07.726 --> 00:01:12.126 “No regulation or law passed by government repeals the laws of economics.” 00:01:12.873 --> 00:01:16.273 I would like to use this meeting to talk about the N.C.U.A.’s recent 00:01:16.273 --> 00:01:21.023 decision to require credit unions with 1 billion in assets and over to publicly 00:01:21.023 --> 00:01:25.263 publish their revenue from overdraft fees and fees for insufficient funds. 00:01:25.897 --> 00:01:27.557 No one likes paying those fees. 00:01:28.047 --> 00:01:29.257 I have paid them myself. 00:01:29.767 --> 00:01:33.577 But anytime you wake up and owe $X that day but have less than 00:01:33.627 --> 00:01:37.237 X dollars available, there are only a series of bad options. 00:01:37.787 --> 00:01:41.737 We are pressuring credit unions to limit what is often the least-bad option 00:01:41.737 --> 00:01:43.637 for members under financial stress. 00:01:44.369 --> 00:01:47.769 I’m also aware that there are policy changes the federal government can 00:01:47.769 --> 00:01:51.569 make to reduce those sticky financial situations, just by making the 00:01:51.569 --> 00:01:53.719 existing financial system work better. 00:01:54.259 --> 00:01:57.959 As much as one-third of all late fees and overdrafts could be eliminated 00:01:57.959 --> 00:02:01.639 with faster payments that get people their money quicker, which is something 00:02:01.639 --> 00:02:04.159 Senator Schatz of Hawaii often mentions. 00:02:04.855 --> 00:02:08.475 The reason for my comments today is that we have not discussed change in 00:02:08.475 --> 00:02:12.255 the fifty three hundred Report at a Board Meeting, and yet I can’t go to 00:02:12.295 --> 00:02:16.665 any event without being asked the same questions: “Why are you doing this to us? 00:02:16.975 --> 00:02:19.295 Do you realize how harmful it is to members?” 00:02:20.021 --> 00:02:21.671 "No one likes paying those fees. 00:02:22.181 --> 00:02:23.391 I have paid them myself. 00:02:23.991 --> 00:02:27.951 But anytime you wake up and owe $X that day but have less than 00:02:27.951 --> 00:02:31.731 X dollars available, there are only a series of bad options." 00:02:32.475 --> 00:02:34.915 My answers are, I wish the N.C.U.A. 00:02:35.315 --> 00:02:39.525 was not doing this – especially on such short notice – and finally yes, I do 00:02:39.525 --> 00:02:41.785 realize how harmful it is to consumers. 00:02:42.503 --> 00:02:45.433 I found out about this burdensome requirement in January. 00:02:45.953 --> 00:02:49.333 In lieu of repeal, I have suggested several ways to make it less 00:02:49.333 --> 00:02:52.953 damaging to both credit unions and to the Share Insurance Fund. 00:02:53.433 --> 00:02:56.233 For example, the same data could be collected in a manner 00:02:56.233 --> 00:02:58.083 where it’s available to N.C.U.A. 00:02:58.553 --> 00:03:01.383 examiners and we only publish aggregate data. 00:03:01.863 --> 00:03:05.533 We could also listen to those pleading for adequate time to prepare, and 00:03:05.533 --> 00:03:09.573 not publish the data until next year, especially since it’s been harder than 00:03:09.573 --> 00:03:13.163 expected to figure out what numbers are to be used for each category. 00:03:13.693 --> 00:03:15.353 All my ideas were rejected. 00:03:15.913 --> 00:03:20.763 Credit unions will now face reputational risk for data that neither the N.C.U.A. 00:03:21.183 --> 00:03:23.343 nor the credit union knows to be correct. 00:03:24.019 --> 00:03:28.559 So, we are now yet another agency mathematically incentivizing institutions 00:03:28.559 --> 00:03:30.709 to avoid serving low-income people. 00:03:31.439 --> 00:03:34.619 This policy is very clear: don’t serve the underserved. 00:03:35.418 --> 00:03:39.358 We are now working against the Federal Credit Union Act, which states credit 00:03:39.358 --> 00:03:44.418 unions are “to create credit…for those of modest means.” Well, it’s not the 00:03:44.418 --> 00:03:47.928 rich that are going to worry about overdraft protection being removed. 00:03:48.318 --> 00:03:52.228 It’s not those with secure, high-paying jobs that will suffer from a further 00:03:52.228 --> 00:03:56.938 reduction in offers for ‘free checking accounts.’ And make no mistake, the 00:03:56.938 --> 00:04:01.478 N.C.U.A.’s requirement is designed to pressure those fees downward, since one 00:04:01.478 --> 00:04:05.948 of the main reasons credit unions want more time to comply is to lower these fees 00:04:06.228 --> 00:04:10.488 and to try to raise revenue in other ways and re-evaluate their business models. 00:04:11.225 --> 00:04:12.785 We have seen this movie before. 00:04:13.495 --> 00:04:17.425 In 2010, the Dodd-Frank Act reduced access to free checking. 00:04:18.005 --> 00:04:22.115 The bill had a provision on debit cards that contained government price-setting, a 00:04:22.115 --> 00:04:26.305 provision that mathematically made it less profitable to serve low-income people. 00:04:26.935 --> 00:04:30.905 The outcome was as painful as it was predictable: ‘free checking’ fell 00:04:30.905 --> 00:04:34.765 away significantly as new requirements kicked in for direct-deposits, 00:04:34.935 --> 00:04:37.005 higher minimum balances, etc. 00:04:37.705 --> 00:04:41.615 Anyone who can’t meet those requirements has to pay monthly account fees or 00:04:41.615 --> 00:04:43.625 lose access to the banking system. 00:04:44.273 --> 00:04:48.253 Doesn’t it seem odd for someone to support the regulations that make it infeasible 00:04:48.253 --> 00:04:53.193 to serve low-income people, and then talk about ‘financial inclusion’ and lament the 00:04:53.193 --> 00:04:55.313 millions of Americans who are unbanked? 00:04:55.853 --> 00:05:00.023 It reminds me of the story about the guy who killed his own parents and then asked 00:05:00.023 --> 00:05:01.973 for leniency because he’s an orphan. 00:05:02.616 --> 00:05:05.426 "That’s the real-world reality people live in every day." 00:05:06.258 --> 00:05:09.088 Can we guarantee the SIF is better off because of this? 00:05:09.528 --> 00:05:09.898 Nope. 00:05:10.498 --> 00:05:12.768 And yet we are adding regulatory burden. 00:05:13.479 --> 00:05:17.409 But two beneficiaries of this misguided interference are two interest groups: 00:05:17.869 --> 00:05:21.669 1) those who benefit politically, and 2) members of the media, who get to 00:05:21.669 --> 00:05:26.129 write click-bait articles that are often devoid of financial or business literacy. 00:05:26.649 --> 00:05:28.299 We have already seen this happen. 00:05:28.949 --> 00:05:32.569 It goes without saying that none of the people supportive of these policies 00:05:32.609 --> 00:05:35.879 will be there with their own money to you offer a better deal when you’re 00:05:35.879 --> 00:05:39.739 a few bucks short and desperately want to avoid a 500 dollar late fee. 00:05:40.474 --> 00:05:42.044 That’s what will eventually happen. 00:05:42.574 --> 00:05:45.914 Overdraft protection, in particular, will become less common. 00:05:46.434 --> 00:05:49.814 Overdraft is when a credit union pays part of your bills for you when 00:05:49.814 --> 00:05:51.234 your account doesn’t have enough. 00:05:51.894 --> 00:05:54.774 Anyone at a banking institution will tell you the most distraught 00:05:54.774 --> 00:05:58.734 customers are not those whose bills were paid via overdraft, much as 00:05:58.734 --> 00:06:00.674 they may not like the 30 dollar fee. 00:06:01.244 --> 00:06:04.904 Nope, the distraught customers are those customers upset that a bill 00:06:04.904 --> 00:06:09.384 wasn’t paid due to insufficient funds, forcing them to pay much higher costs. 00:06:10.110 --> 00:06:14.050 Anyone would rather pay 30 dollar than a 500 dollar late government fee. 00:06:14.650 --> 00:06:18.640 What about someone in my position, a few years ago, who owed four thousand 00:06:18.640 --> 00:06:22.000 dollar to my state government, and was forced to pay one thousand 00:06:22.000 --> 00:06:24.140 dollars extra for being one day late. 00:06:24.810 --> 00:06:28.330 If my account was a few bucks short of four thousand dollars, would I rather 00:06:28.330 --> 00:06:32.750 pay a 30 dollar overdraft fee or the extra 1,000 dollars to the government? 00:06:33.450 --> 00:06:37.720 Years ago, I was trying to live in an expensive city on 27,000 dollars a 00:06:37.720 --> 00:06:40.090 year salary while paying student loans. 00:06:40.690 --> 00:06:44.230 I went to go to work and saw that my car was gone and called the police. 00:06:44.710 --> 00:06:46.990 Turns out it was towed for late registration. 00:06:47.500 --> 00:06:50.650 Back then, I was constantly juggling payments trying to avoid 00:06:50.650 --> 00:06:52.350 the highest costs of being broke. 00:06:52.920 --> 00:06:57.050 The highest costs were, and are, invariably charged by the same governments 00:06:57.050 --> 00:06:58.680 that lecture the private sector. 00:06:59.110 --> 00:07:02.890 Governments charge fees and use coercive tactics that are significantly 00:07:02.890 --> 00:07:07.170 worse than anything labeled a ‘junk fee.’ And yet, we rarely hear 00:07:07.170 --> 00:07:10.840 about that from self-proclaimed ‘consumer protection’ advocates. 00:07:11.538 --> 00:07:14.418 "We can’t pretend that government artificially forcing down 00:07:14.418 --> 00:07:17.078 the price of something won’t have major negative effects. 00:07:17.708 --> 00:07:20.858 We also can’t pretend that it makes sense for the N.C.U.A. 00:07:21.178 --> 00:07:24.998 to make interest rate risk our top Supervisory Priority the same 00:07:24.998 --> 00:07:28.308 year we’re pushing credit unions away from non-interest income." 00:07:29.152 --> 00:07:33.982 Anyway, about my car that was towed: I wound up paying 6 times the registration 00:07:33.982 --> 00:07:37.852 fee, after paying the government for impound costs and other charges. 00:07:38.402 --> 00:07:41.932 But I was lucky, I had a salaried job and could call work and said 00:07:41.932 --> 00:07:43.252 I couldn’t come in that day. 00:07:43.892 --> 00:07:47.302 Millions of Americans in that situation would lose a day’s pay. 00:07:48.035 --> 00:07:51.195 Then there are those whose government had towed their car or put a boot 00:07:51.195 --> 00:07:55.135 on it, causing them to be late to work and thus violate their parole. 00:07:55.575 --> 00:07:58.075 Of course, you would pay 30 dollar to avoid that. 00:07:58.585 --> 00:08:01.305 That’s the real-world reality people live in every day. 00:08:01.695 --> 00:08:05.465 Anyone whose account is slightly short of money would rather pay a 30 dollar 00:08:05.465 --> 00:08:09.855 overdraft fee than miss the child support payment that is the only way they can get 00:08:09.855 --> 00:08:11.965 visitation to see their kid that year. 00:08:12.693 --> 00:08:13.743 That’s the real world. 00:08:14.363 --> 00:08:17.613 I do agree there are only bad choices for those short of cash. 00:08:18.203 --> 00:08:21.973 There may be policies to make life more affordable and less inflationary. 00:08:22.633 --> 00:08:26.293 But the N.C.U.A.’s recent policy on overdraft and N.S.F. 00:08:26.763 --> 00:08:28.193 fees is not among them. 00:08:28.895 --> 00:08:31.815 We can’t pretend that government artificially forcing down 00:08:31.815 --> 00:08:34.525 the price of something won’t have major negative effects. 00:08:35.035 --> 00:08:38.135 We also can’t pretend that it makes sense for the N.C.U.A. 00:08:38.605 --> 00:08:42.345 to make interest rate risk our top Supervisory Priority the same 00:08:42.345 --> 00:08:45.655 year we’re pushing credit unions away from non-interest income. 00:08:46.388 --> 00:08:51.058 Because no regulation or law passed by government repeals the laws of economics. 00:08:51.695 --> 00:08:53.045 This concludes the statement. 00:08:53.817 --> 00:08:58.107 If your Credit union could use assistance with your exam, reach out to Mark Treichel 00:08:58.107 --> 00:09:00.747 on LinkedIn, or at mark Treichel dot com. 00:09:01.297 --> 00:09:03.927 This is Samantha Shares and we Thank you for listening.