August 4, 2009

Some find courtesy overdrafts discourteous

Customers least able to afford courtesy overdraft fees at credit unions are paying the most for the programs, industry researchers said.

Consulting firm Bretton Woods said 10 percent to 20 percent of credit union members pay an average of $1,374 a year in overdraft fees, USA Today reported Tuesday.

Some U.S. lawmakers are pushing for reform of the system that allows credit unions to cover overdrawn checks for members without the member's permission.

All banks and credit unions should be required to get customer's OK before they sign them up for overdraft services, said Christopher Dodd, D-Conn., chairman of the Senate Banking Committee.

Credit unions argue that discontinuing courtesy overdrafts would drive customers away. If we didn't (provide the service) "¦ consumers would go somewhere else and get it, said U.S. Senate Federal Credit Union Chief Executive Officer Susan Enis.

As credit union revenue supports the member-owned firms, however, bank consultant Alex Sheshunoff called the courtesy overdrafts Robin Hood in reverse, as the least able to afford them are providing revenue for the credit union's other members.