Several weeks ago, we blogged about recent changes the National Credit Union Administration (NCUA) made to the Form 5300 – also known as the “Call Report.”
To recap: Beginning March 31, 2024, NCUA now requires credit unions with assets of $1 billion or more to report the income earned through overdraft fees and NSF fees on their quarterly Call Report. These changes will apply to the Q1 Call Report, which is due next week, on April 30th.
Since we last blogged on this topic, the advocacy team at America’s Credit Unions has engaged with NCUA on this issue and has fought to ensure NCUA hears the perspective of the credit unions that will be impacted by these changes. For example, America’s Credit Unions has noted that these changes were not announced in a press release and has asked that NCUA publicly announce future changes to the Call Report.
Additionally, America’s Credit Unions also recently sent a letter to NCUA to request that the agency refrain from publicly releasing the overdraft and NSF fee data. Should that information be released publicly, reputational harm to credit unions could result, as we’ve already seen in California. In recent years state-chartered credit unions in California were required to report their overdraft and NSF fee income to the state regulator, who then issued a public report, which resulted in cherry-picking of the data and negative media coverage for certain California credit unions. Should NCUA publish the Call Report data for these fees, history could repeat itself on a nationwide scale.
Credit unions may have questions regarding which transactions should be included. The Call Report instructions refer to an overdraft fee as “fees… that are charged to a share or deposit account holder due to the processing of a transaction that exceeds the account holder’s account balance.” As for NSF fees, those are referred to as “fees… that are charged to a share or deposit account holder for a declined transaction that would have exceeded the account holder’s account balance if the credit union honored the payment.” How to actually calculate those fees, however, is another matter. The instructions refer to the fees being “recorded as income under [Generally Accepted Accounting Principles, or GAAP].” Thus, a credit union may want to review with their accounting and finance professionals which fees are included as income under GAAP, and whether any amounts can be deducted from that figure.
For example, America’s Credit Unions has heard from one credit union that is planning to deduct charge-offs when calculating these fee amounts, in order to paint a more complete picture of the costs associated with covering overdrafts and transactions with insufficient funds. By doing so, the credit union in question could report negative overdraft and NSF fee income. This decision was reached after a conversation with the credit union’s examiner. However, America’s Credit Unions cannot guarantee that all examiners will view this issue in the same manner, and cannot verify if such an approach conforms with GAAP. Credit unions may want to explore their options with their accounting or finance professionals ahead of the April 30th filing deadline. The questions around these reporting requirements indicates that perhaps NCUA should have given a longer lead time before the changes took effect, which is something else America’s Credit Unions has advocated for regarding future changes to the Call Report.
America’s Credit Unions will continue to engage with NCUA on this issue, and to fight for credit unions and the members they serve. Finally, if you’d like to contribute to our advocacy efforts on this issue, consider responding to this America’s Credit Unions survey regarding non-interest income.
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