Skip to main content

NCUA's Harper Urges Credit Unions To Allow Ample Time For Revising Overdraft Programs

 


By Ray Birch

ALEXANDRIA, Va.—New NCUA data show a dependence among some credit unions on overdraft fees, and NCUA Board Member Todd Harper is advising that if a credit union needs to change its OD course, it should begin its planning now.

In an exclusive interview with CUToday.info, Harper delved more deeply into the data from NCUA’s recent Research Note that provides an analysis of statistics for overdraft and non-sufficient funds fees.

The analysis of 444 credit unions that supplied OD and NSF fee data to NCUA in Q3 2024 reveals overdraft and NSF fees make up about 2% to 5% of total revenues, and that CUs are not using those funds to offer members better deals on other products and services.

iStock-525141061

As CUToday.info reported, Harper stated it’s time for credit unions to “rethink” their overdraft and non-sufficient funds programs.

“I want to make it really clear, because some people get confused on this point, I'm not saying get rid of overdraft programs,” Harper told CUToday.info. “Overdraft programs serve a legitimate purpose. However, the research note said there are some features of overdraft programs that can be problematic.

“For example, if it's not a reasonable and proportional fee, that could be problematic,” continued Harper. “It can also be problematic if there are multiple presentments charging the consumer. And, of course, it can be problematic if you authorize positive so the consumer thinks they have the money and then when the settlement comes, they settle negative—and they get charged the fee that they didn't expect. That's a surprise.”

Credit unions need to properly craft their overdraft programs to comply with consumer financial protection laws, Harper reminded.

“They also need to understand the marketplace is changing and that we've been seeing banks drop their overdraft fees,” Harper said. “If there is too much concentration on overdraft and NSF fees (at a credit union) that could be problematic for a credit union’s future. It could affect its safety and soundness.”

Harper acknowledged it takes time for a credit union to “evolve” its overdraft plan.

“For example, I spoke to a credit union that's above a billion dollars in assets that does not charge any overdraft or NSF fees, and it has done that for a number of years,” Harper explained. “It took them 18 months to make that decision and then to develop the strategic plan for where they were going to make up that lost revenue.”

More Mortgage Servicing

The credit union, Harper pointed out, determined it would make up the money it lost not charging for overdrafts by doing more mortgage servicing.

“Credit unions need to have that time. This is not something that changes quickly,” Harper cautioned. “But if the market is changing and consumers’ expectations are for lower fees overall, you've got to expect at a certain point in time consumers will start to look at the credit union and say these overdraft fees are too high, and they might switch their primary financial provider.”

Harper Todd

Todd Harper

Harper pointed to “interesting” findings from the research note.

“First of all, the higher fees don't lead necessarily to lower fees in other areas,” he said. “To me, that says a credit union’s business model may be too dependent on fees. Maybe it needs to reconsider and go into where the real growth is, and that is by making loans and doing those at competitive rates. That's actually where you are more successful in the long term.”

Another research note data point drew Harper’s attention—higher fees don't necessarily lower credit union interest rates.

“There's not a correlation there. That's an interesting finding. It's something I think we're going to have to continue to watch and see how that evolves,” he said.

Overall, did the research note show an alarming overdependence on overdrafts among the credit unions supplying the data?

“The short answer is no. But what the data did say to me is there are some credit unions that are over dependent,” Harper said, calling those organizations outliers. “There's some whose overdraft and NSF fees make up as high as 18% of their overall revenue. That's an over concentration. But many fell into that 3% to 4% range. That's probably a good place to be.”

While large credit unions may have the product offerings and scale to absorb a cut in OD and NSF fee income, Harper believes small credit unions are not at a disadvantage here.

Small CUs

“Small credit unions oftentimes have easier ways in which to start and develop a new program,” Harper said. “I know of a credit union that looks at each member’s credit scores and then sends them a live check each year around Thanksgiving, telling them how big of a loan they qualify for as part of the credit union’s holiday loan program. They're looking at the individual. It's a line of credit they're offering, and they've been highly successful in terms of bringing in new members.

“Now it’s gotten to the point where consumers are looking forward to getting their check each year because it helps them plan for their holidays,” continued Harper. “That was a small credit union with less than $100 million in assets—they came up with this idea and it made a big difference in how they went about doing their business.”

Harper concluded by explaining what he means in stating credit unions need to rethink their overdraft programs.

“In rethinking their programs, they need to be looking at the market and benchmarking. Are they out of line from where other institutions in their local area are in their overdraft and NSF fees? Is it a standard deviation? Is it more? And do they need to be rethinking their rates?” Harper said. “They also need to make sure their programs don't have problematic features that I talked about earlier—things like authorizing positive and settling negative, as well as fees that are not reasonable and proportional. And finally, they need to be thinking about where they are going to make up that revenue.”

Harper pointed out overdraft and NSF fees disproportionately fall on certain communities—such as lower-income consumers.

“We want to make sure that if you're a credit union you've got a mission to meet the needs of members, especially those of modest means,” Harper said. “Make sure you are not pushing somebody down with the fees, but actually lifting them up. That's what I mean when I say rethink their programs.”

Comments

Popular posts from this blog

NCOFCU Newsletter

The Bucket Coach is a financial advice book designed by Fire Services Credit Union, Tronto, Canada. and written exclusively for Fire Fighters It's a practical guide for household financial management, including investments, credit and mortgages, and retirement. Developed with contributions from Fire Fighters," NCOFCU Newsletter : " Kevin Connolly Chief Executive Officer    Fire Services Credit Union Phone: 416-440-1294 ext 301  Toll Free: 1-866-833-3285 E-mail:  kevin@firecreditunion.ca 1997 Avenue Rd Toronto, ON M5M 4A3 

Sunday Reading - What is the Dow Jones?

    What is the Dow Jones? Created in 1896, the Dow Jones Industrial Average is one of the world’s oldest and most widely recognized stock indexes—a measure tracking the stock performance of a selected group of companies ( see most recent data ). Originally designed to track America’s leading industrial firms, the Dow has evolved into a cultural and financial shorthand for the health of the US economy. As of 2025, it measures 30 major companies —like McDonald's, Boeing, and Nike—across sectors such as technology, healthcare, finance, and consumer goods.  Unlike most modern indexes, which are weighted by the total value of a company’s shares, the DJIA uses a price-weighted formula —meaning stocks with higher share prices exert more influence, regardless of company size. The DJIA has been updated 59 times since its creation to reflect changes in the US economy ( see ch...

New from AutoLink

New from AutoLink

Powell Rejects Any Plan for Fed to Intervene in Secondary Market to Bring Down Rates

  Frank Diekmann October 20, 2025 2:22 am No Comments PHILADELPHIA–Federal Reserve Chair Jerome Powell said there are no plans for the central bank to directly intervene in secondary mortgage markets in an attempt to help bring down mortgage rates, an idea some have proposed as a means of addressing the affordability crisis In housing. Jerome Powell Speaking at the  National Association for Business Economics  conference in Philadelphia, Powell spoke to the Fed’s progress with “quantitative tightening,” that is, its work to reduce the more than $6 trillion of securities it holds on its  balance sheet . Read more about the Balance Sheet HERE Those holdings include approximately $2 trillion in mortgage-backed securities (MBS), which are bundles of home loans that are packaged together and sold to investors, usually by middlemen  Fannie Mae and Freddie Mac , noted Realtor.com. Rolling Off Balance Sheet As the report noted, the Fed dramatically increased M...

The Role and Hazards of an Interim Executive

  The Role and Hazards of an Interim Executive Leadership transitions are rarely smooth. A change at the top can trigger uncertainty, speculation, and anxiety. Staff worry about their jobs, members wonder about continuity, and boards feel the weight of stewarding the organization through uncertain change. The utilization of an interim executive director is meant to stabilize the organization and allow the board enough space and capacity to find the right successor leader. Here’s a catch: if an interim executive is also a candidate for the successor role, the very purpose of an interim engagement is compromised. With an Interim, there’s always a second wave of anxiety Every leadership transition comes with some anxiety. The staff sometimes don’t know what’s going on. The board is worried about continuity, and members may be worried about joining. One task of an interim is to absorb some of that anxiety and provide reassurance that things are moving forward. But there is al...

How Stablecoins Could Prove to Be Anything But Stable for CUs That Don’t Get Moving

LOST PINES, Texas–With the GENIUS Act enacted and the countdown on for NCUA and regulators to get rules in place for stablecoins, credit unions were told it’s “go time” to begin preparing for a new technology that could “eat the lunch” of interchange. The cautionary words came from  Dr. Lamont Black , an associate professor at the Driehaus College of Business at DePaul University, where among other things he teaches a graduate course on cryptocurrency, and who is also a fellow in Filene’s Credit Union of the Future Center of Excellence, and who s well-known to many in credit unions for his work and insights.  After several years of speaking to credit unions on crypto, he told  Catalyst Corporate’s  Strategic Summit meeting he has pivoted now due to the rapid change taking place, and in addition to talking about AI (see separate reporting in the CU Daily), he has a warning for CUs when it comes to another emerging technology. Eating the Lunch of Payments “I believe st...

Understanding the Fed’s Balance Sheet

Chair Jerome H. Powell Monetary policy is more effective when the public understands what the Federal Reserve does and why. With that in mind, I hope to enhance understanding of one of the more arcane and technical aspects of monetary policy: the Federal Reserve's balance sheet. A colleague recently compared this topic to a trip to the dentist, but that comparison may be unfair—to dentists. 1 Today, I will discuss the essential role our balance sheet played during the pandemic, along with some lessons learned. I will then review our ample reserves implementation framework and the progress we have made toward normalizing the size of our balance sheet. I will conclude with some brief remarks on the economic outlook. Background on the Fed's Balance Sheet One of the primary purposes of a central bank is to provide the monetary foundation for the financial system and the broader economy. This foundation is made of central bank liabilities. On the Fed's balance sheet, the liabili...

Fire Police City County Federal Credit Union to construct new Fort Wayne headquarters

Fire Police City County Federal Credit Union announced Wednesday plans to break ground next month on a headquarters at North Clinton Street and Penn Avenue. The project will cost about $13 million, a spokesman said through email. The new building will have about 22,000 square feet, including a full-service branch, to accommodate the credit union’s growth in recent years. The credit union has more than 11,300 members at six branches in Fort Wayne and New Haven and has experienced a 7% membership increase over the last five years, the news release said. The credit union’s assets have grown about 46%. “As our membership continues to grow, it’s essential that we grow with it,” Diane Scherer, president and CEO of the credit union, said. The new headquarters represents the credit union’s “ongoing commitment to providing exceptional service,” expanding its capabilities and investing in the future, she said. “We’re excited to build a space that reflects our values and enhances the experience f...

Treasury/SBA issue information on $349B available for business lending

CUNA  The coronavirus disease (COVID-19) relief legislation signed into law last week recognizes credit unions as part of several vital economic recovery programs, notably the $349 billion Paycheck Protection Program (PPP). Through the program, the Small Business Administration (SBA)  will make available funds for small businesses  to secure up to eight weeks of payroll costs including benefits, as well as to pay interest on mortgages, rent and utilities. CUNA continues to engage with the SBA and Treasury on strong specific guidance on the PPP. “Treasury and the Small Business Administration expect to have this program up and running by April 3rd so that businesses can go to a participating SBA 7(a) lender, bank, or credit union, apply for a loan, and be approved on the same day,” said Treasury Secretary Steven Mnuchin. “The loans will be forgiven as long as the funds are used to keep employees on the payroll and for certain other expenses.” All existing SBA-cert...

For Banks and Credit Unions, AI Can Be Risky. But What’s Riskier? Falling Behind.

By Nicole Volpe,  Contributor at The Financial Brand For many bank and credit union leaders, Generative AI is mostly generating… anxiety. On one side is the fear of getting it wrong: exposing sensitive data, triggering a compliance breakdown, or wasting money on experiments that never scale. On the other looms something even more stress-inducing: watching competitors that have mastered AI serve their customers faster, cheaper, and with more personalization, while gaining market share in the process. Small and mid-sized financial institutions have long worked to offset competitive disadvantages versus larger and more-digital competitors, but AI threatens to widen the gap. Global and national players have the budgets and talent to embed AI deeply within their operations. Fintechs can pivot quickly and launch new digital experiences with fewer legacy constraints. Meanwhile, a majority of banks and credit unions sit in between — too small to match the giants’ scale, yet too complex and...