Financial regulators, including the National Credit Union Administration, should “do the right thing” and prohibit banks and credit unions from charging any overdraft or insufficient fund fees during the pandemic, the Center for Responsible Lending said in a new report Wednesday.
But a credit union affiliated with the center is not following that recommendation and is only waiving insufficient fund fees for up to two items a month.
“As the crisis impacts their finances, many families are carrying balances on their credit cards, taking money out of savings accounts, and delaying payments,” the center said in the new report. “Overdraft fees will only compound these burdens and drive financial stability for affected households further out of reach.”
The center warned that overdraft fees could “balloon exponentially” as the unemployment rate soars as a result of the coronavirus crisis.
CRL said that the CFPB should issue a rule that would deem it an unfair and abusive practice to charge overdraft fees—or fees unlimited in number and amount– during an economic crisis.
However, the Self-Help Credit Union, a Durham, N.C.-based credit union that is affiliated with CRL has not gone that far. The credit union has waived insufficient fee charges for up to two returned items a month. Normally, the credit union charges $25 per item, with a maximum of $75 each day.
Senate Banking Committee ranking Democrat Sherrod Brown (D-Ohio) and Sen. Cory Booker (D-N.J.) have introduced legislation to ban overdraft fees during the health crisis. CRL said that legislation should be included in the next pandemic-related legislation.
The credit union community has been debating how to handle overdraft fees during the coronavirus crisis. The NCUA board tabled a proposal by Chairman Rodney Hood that would have allowed credit unions more flexibility in working out overdrafts with their members. The plan, however, would not have banned fees.
CUNA and NAFCU endorsed Hood’s plan. Democratic board member Todd Harper opposed it, saying that credit union members should be given more help during the pandemic. Republican board member J. Mark McWatters opposed it, saying that it was coming to the board as an interim final rule that did not allow for public comment before being adopted.