ATLANTA (8/7/13)--At the request of the Georgia Credit Union Affiliates (GCUA), the Georgia Department of Banking and Finance has issued a declaratory order exempting overdraft fees charged by state-chartered credit unions from the state's maximum limit, "in order to provide parity with federal credit unions," said the department.
The July 11 order from Commissioner Kevin B. Hagler means that when a member overdraws a deposit account such as a share account or share draft account by using a check, debit card, ATM card or other means, a state-chartered credit union can charge an overdraft fee without any usury limitations.
"In light of the fact that federal law authorizes federal credit unions to impose overdraft fees on members' deposit accounts without any usury limitations, the commissioner declares that overdraft fees imposed by state-chartered credit unions are not subject to state law usury limitations," Hagler said in the order.
The order was prompted by court cases against banks, GCUA said. "GCUA became aware of recent court cases against a couple of Georgia banks noting that banks were in violation of the state's usury provision for fees charged in connection with overdrafts," said Cindy Connelly, senior vice president of government influence at GCUA. Credit unions were not involved in the cases.
In those cases, "the court was asked to find that the imposition of certain fees charged by financial institutions might be considered usury under Georgia law," Connelly told News Now. "We believed, from our research and from previous opinion letters that we knew where the federal regulator stood on this type of issue."
GCUA requested the department exercise its authority under state law O.C.G.A. section 7-1-61 to issue an order that would ensure state-chartered credit unions parity with federal credit unions operating in Georgia, said Connelly. "The ruling is the outcome of that request," she said, adding that the Department of Banking issued a similar ruling for banks about a week earlier.
In the declaratory order, Commissioner Hagler said, "Just like federal credit unions, state-chartered credit unions are authorized to accept deposit." The department "views overdraft fees imposed on deposit accounts as part of the deposit taking power of state-chartered credit unions."
The order explained that "unlike federal credit unions, state-chartered credit unions are potentially subject to a usury challenge for the imposition of overdraft fees as such fees ...can in certain circumstances be viewed as interest under state law" while any attempt to characterize an overdraft fee imposed by a federal credit union as interest for purposes for state usury would be pre-empted.
Therefore, "as national banks and federal credit unions can impose overdraft fees free of any state law usury limitations, state-chartered credit unions, subject to regulation by the department, can similarly impose overdraft fees and not be subject to state law usury claims," the order said.