I know all you kossacks read Credit Union Times. Right? In case you missed it, a few days ago CU Times executive editor Heather Anderson did a really brave thing.
In a 2/4/16 op-ed, "The CFPB Is Right About Overdrafts," Anderson tells credit union managers to stop harming their members (depositors) with overdraft fees, the way most banks do:
...the average bank overdraft charge is $30. The average credit union charge is $29.
She reminds them how big this problem is:
More than 40 million Americans overdraw their checking accounts each year, roughly 12.5% of the population. I’d imagine that percentage climbs significantly among those of modest means.
As of June 2015, overdraft fees topped $32 billion on an annual basis. If credit unions claim roughly 10% of the financial services market, that’s $3.2 billion in annualized overdraft fees.
She adds:
Credit unions aren’t financial nannies, but a little compassion would be nice.
...For years, consultants have told credit unions that young members want transaction accounts that don’t go negative. Credit unions have ignored them, and then have the nerve to wonder aloud why the average member age keeps rising.
Wow! Is this any way to talk to one's readers and subscribers? Apparently, yes!
A dash of truth-telling is occasionally required, but few editors — least of all editors of mainstream industry publications — have the grit to actually deliver the necessary, as Anderson has done.
I think this lady has guts. She may have riled up a bunch of her subscribers, but I hope credit union managers take her critique in the spirit in which she intended it: as a wakeup call to somehow find a way to do the right thing. Somehow.
Anderson acknowledges how difficult this could be:
...drastically reducing overdraft income would threaten safety and soundness for many credit unions.
That’s because many CUs rely on overdraft fee income to survive. If they do away with these high fees, how will they stay afloat? Should credit unions just shut their doors and tell their members to go bank at Chase?
How can CUs add some extra income, and remain sustainable, while not hurting their members? Anderson doesn't say. It's an open question, and a vital one.
But despite this huge unsolved problem, she doesn’t back off, not an inch:
Income inequality is a growing problem in America. The popularity of presidential candidate Bernie Sanders is evidence of that. Remember a few years ago at NAFCU Caucus when Sanders was booed on stage when he said redistribution of wealth was necessary? Most of you think he’s crazy, but millions of American voters who aren’t earning six figures think otherwise.
...The well-off don’t worry about overdraft fees, and in the rare instance they do, it doesn’t harm their household budgets. However, when a poor American is hit with a $29 fee, the domino effect can be severe.
Darn right. Credit unions have to figure this out — somehow. If it takes a courageous editor to hustle them along the path, so be it.
You go, Ms. Anderson!