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Earlier this week, the NCUA issued a letter to credit union boards of directors and CEOs highlighting the risks associated with certain overdraft and NSF fee practices. The letter also outlined practices that may assist credit unions in managing and mitigating these risks. A condensed version of the letter is below:
Dear Boards of Directors and Chief Executive Officers:
If your credit union assesses overdraft or non-sufficient funds (NSF) fees that your members cannot reasonably anticipate or avoid, your credit union may be exposing itself to heightened reputational, consumer compliance, third-party, and litigation risk.
Unanticipated fees can cause substantial harm to credit union members. While there may be situations with unique facts or circumstances, the assessment of unanticipated fees on credit union members generally represents an unfair or deceptive act or practice under Section 5 of the Federal Trade Commission Act (FTC Act) and Sections 1031 and 1036 of the Consumer Financial Protection Act of 2010 (CFPA).
The NCUA is issuing this letter to highlight the risks associated with certain overdraft and NSF fee practices and outline practices that may assist credit unions in managing and mitigating these risks. Further, the NCUA is describing its supervisory approach to such fees and outlining its expectations that credit unions appropriately act to mitigate the associated risks. This guidance is consistent with the NCUA’s efforts to achieve the credit union system’s statutory mission to meet the credit and savings needs of members, especially those of modest means.