Simpson sets the record straight on overdraft programs
America’s Credit Unions President/CEO Scott Simpson reiterated the industry’s people-first cooperative structure and commitment to supporting members’ unique needs in a letter sent to Sens. Elizabeth Warren, D-Mass., Richard Blumenthal, D-Conn., and Cory Booker, D-N.J., following their outreach to 21 credit unions regarding overdraft or courtesy pay programs.
Simpson explained that an overdraft fee is fully disclosed and must be opted into, where the consumer has a choice on whether they need the program and are willing to pay for it. “Credit unions take a proactive, transparent approach to overdraft services, ensuring members understand how these programs work and how to use them responsibly,” he added.
“These programs give members a safety net when they accidentally or unexpectedly spend more than they have in their accounts,” he wrote. “Instead of facing costly returned-check fees, missed bill payments, or the embarrassment of a declined transaction at the checkout line, members can rely on Courtesy Pay to keep essential purchases, like groceries or gas, on track.”
Courtesy Pay programs also support financial literacy efforts, helping people gain a better understanding of their spending habits and improving their financial management over time. “Far from taking advantage of consumers, these services are valued tools that help people manage real-life challenges,” Simpson said.
Simpson encouraged lawmakers to let market dynamics and consumer needs guide business decisions, rather than imposing rigid limits. “Very broad public policy interventions aimed at overdraft risk will undoubtedly undermine the stability and viability of the entire credit union system, which is uniquely centered on its 144 million members, many of whom are your constituents who we collectively serve,” Simpson wrote.
The letter also noted it’s crucial to strike a careful balance between “protecting consumers, meeting their financial needs, and promoting financial inclusion.”
“While we may disagree on the mischaracterization of credit union overdraft programs as predatory, we share your concern for ensuring consumers get fair-priced financial products and services that meet their needs,” he added. “Credit unions and our cooperative finance model have always been about that.”