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CUs represented in CFPB overdraft discussion
NEW YORK, N.Y. (2/23/12)—Helping members avoid overdrafts is consistent with the central mission of credit unions, Robert Allen, president/CEO of Long Island, N.Y.'s Teachers FCU, said in a Wednesday meeting with the Consumer Financial Protection Bureau (CFPB) in New York City.

Allen appeared on behalf of his credit union, the Credit Union Association of New York, and the Credit Union National Association (CUNA) at a panel discussion on overdraft fees. He was the only credit union representative speaking during the meeting. Representatives from large and community banks and consumer groups also joined CFPB staff at the meeting.

CFPB Director Richard Cordray during the meeting announced a new overdraft fee initiative, for which the bureau will seek public comment.  Cordray said the bureau will use the comments from consumers, the financial services industry, and other interested parties to craft new overdraft fee disclosures and rules.

He added that the CFPB also will use the commentary to assist with policymaking on overdraft practices and to prioritize the bureau's regulatory and education work. It is not clear to what extent credit unions will be part of this effort.  CUNA will be meeting again with CFPB staff on this issue.

Cordray will be speaking to CUNA's Government Affairs Conference next month at the Washington, D.C. Convention Center.

The agency has distributed questionnaires to large banks in an effort to evaluate how those institutions' overdraft policies affect consumers. The CFPB in a Wednesday release said it plans to examine the practice of re-ordering purchases and payments to maximize overdraft fees charge, whether consumers can anticipate and avoid overdraft fees, and how differences in the way institutions explain and promote overdraft programs may affect opt-in rates. As part of the project, the CFPB will also reexamine a recent Federal Deposit Insurance Corporation study that suggested that overdraft programs disproportionately impact low-income and young consumers.

The CFPB is also considering requiring a so-called "penalty fee box" – which would add information on the amount overdrawn, and total overdraft fees charged each month – be added to a consumers monthly checking account statement, and is developing a consumer overdraft fee education project.

Citing industry estimates, the CFPB said the average overdraft fee ranged from $30 to $35 in 2011, and has increased by 17% since 2005.

A study by the Federal Deposit Insurance Corporation published in 2008 found that consumers who overdrew 20 or more times per year paid an average of $1,610 in overdraft fees annually.

Allen said credit unions support meaningful overdraft fee disclosures, but added that the CFPB needs to consider the costs that credit unions and other institutions would bear as it addresses overdraft fee issues.

He noted that credit unions routinely charge lower overdraft fees than those charged by banks, and said his credit union refunds many account fees and makes financial counseling available to members. CUNA Regulatory Counsel Jared Ihrig accompanied Mr. Allen.

For more on the CFPB overdraft project, use the resource link.
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