Credit Union Regulatory Guidance Including: NCUA, CFPB, FDIC, OCC, FFIEC

Samantha: Hello, this is Samantha Shares.

This episode covers N C U A Vice
Chairman and Board Member Kyle S.

Hauptman statement on the
agency’s 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.

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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

“No regulation or law passed by
government repeals the laws of economics.”

I would like to use this meeting
to talk about the N.C.U.A.’s 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.

I’m 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 can’t go to

any event without being asked the same
questions: “Why are you doing this to us?

Do you realize how
harmful it is to members?”

"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 – especially on such
short notice – 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 it’s 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 it’s 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:
don’t serve the underserved.

We are now working against the Federal
Credit Union Act, which states credit

unions are “to create credit…for those
of modest means.” Well, it’s not the

rich that are going to worry about
overdraft protection being removed.

It’s not those with secure, high-paying
jobs that will suffer from a further

reduction in offers for ‘free checking
accounts.’ And make no mistake, the

N.C.U.A.’s 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: ‘free checking’ fell

away significantly as new requirements
kicked in for direct-deposits,

higher minimum balances, etc.

Anyone who can’t meet those requirements
has to pay monthly account fees or

lose access to the banking system.

Doesn’t it seem odd for someone to support
the regulations that make it infeasible

to serve low-income people, and then talk
about ‘financial inclusion’ 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 he’s an orphan.

"That’s 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 you’re

a few bucks short and desperately
want to avoid a 500 dollar late fee.

That’s 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 doesn’t 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

wasn’t 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
‘junk fee.’ And yet, we rarely hear

about that from self-proclaimed
‘consumer protection’ advocates.

"We can’t pretend that government
artificially forcing down

the price of something won’t
have major negative effects.

We also can’t pretend that it
makes sense for the N.C.U.A.

to make interest rate risk our
top Supervisory Priority the same

year we’re 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 couldn’t come in that day.

Millions of Americans in that
situation would lose a day’s 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.

That’s 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.

That’s 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.’s recent
policy on overdraft and N.S.F.

fees is not among them.

We can’t pretend that government
artificially forcing down

the price of something won’t
have major negative effects.

We also can’t pretend that it
makes sense for the N.C.U.A.

to make interest rate risk our
top Supervisory Priority the same

year we’re 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
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This is Samantha Shares and
we Thank you for listening.