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FOCUSREPORT/2021 Regulatory Outlook
IN BRIEF
Overdraft
Rule
Showdown
Looms
The credit union com- munity and new NCUA Chairman Todd Harp- er may be heading fora showdown over a proposed rulethat changes the agency’s policieson overdrafts. Credit unions andtheir trade groups support theplan, while Harper and severalconsumer groups said it wouldnot benefit consumers as theyweather the economic impact ofthe pandemic.
“The proposed change to remove the 45-day limit will bebeneficial to credit unions,” MaryMullens, enterprise risk managerat Michigan Schools and Government Credit Union ($2.7 billion, Clinton Township, Mich.),told the agency in commentingon the proposed rule.
In December, the board approved a proposed rule thatwould require credit unions toestablish specific time limits formembers to either deposit fundsor obtain a loan to cover eachoverdraft. Currently, the NCUArules prescribe a 45-day timelimit for members to solve overdraft problems.
When he was chairman, Republican board member RodneyHood tried to bring the overdraftrule to the board but was blockedby Harper and then-RepublicanBoard Member J. Mark McWat-ters. When Republican KyleHauptman replaced Mc Watters,Hood brought the policy back tothe board. Hood and Hauptmanvoted to approve it, while Harpercontinued to oppose it.
Since then, Harper, a Democrat, has taken over as chairman.And while the chairman generally controls the board’s agenda,Hood and Hauptman could forcethe issue before the board if theygive proper notice in advance ofa board meeting.
Harper voiced his opposition
at the December meeting, stat-
ing, “The reality is that overdraft
programs are products of finan-
cial exclusion, not financial in-
clusion.” He said the board could
have taken a bold step toward
helping credit union members
deal with overdrafts but chose
not to.
Consumer groups, as well as
officials from Self-Help Credit
Union and Self-Help Federal
Credit Union in Durham, N.C.,
agreed. “By extending the time
period for negative balance reso-
lution beyond 45 days, the pro-
posal would expose members to
additional overdrafts, overdraft
fees and non-sufficient funds
fees during the extended period,”
they said.
But Kendra C.J. Rubin, chief le-
gal officer at the $4.8 billion SE-
FCU, headquartered in Albany,
N.Y., said the “one-size-fits-all
regulatory requirement makes
it difficult for individual credit
unions to align their overdraft
charge-off policies with other
charge-off policies.”
Mullens said the rule will give
credit unions the ability to de-
termine an appropriate time
frame that meets their “unique
situation.”
Christopher McKenna, president/CEO at the $2.29 billionCAP COM Federal Credit Union,also in Albany, said it is in thebest interest of a credit union tobe able to determine the lengthof time to cure an overdraft. n
