University Credit Union, a not-for-profit financial cooperative that serves the university community, announced it is eliminating its overdraft fees, or fees charged to consumers when a transaction causes their checking or savings account balances to drop below $0.
"The overdraft protection fee is a controversial fee structure that has historically had a negative impact on financially vulnerable members," said University Credit Union CEO David Tuyo. "As a not-for-profit financial cooperative, it’s our top priority to give all of our members the financial advantages they need to succeed."
University Credit Union is the latest financial institution to eliminate its overdraft fees. Bank of America announced in January that it would reduce its overdraft fees, and in December 2020, Capital One became the first top-10 bank and the sixth retail bank in the U.S. to elimnate overdraft fees.
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University Credit Union says new policy will promote ‘economic inclusion’
The Consumer Financial Protection Bureau (CFPB) conducted a study in December that showed revenue from overdraft fees and non-sufficient funds (NSF) fees reached $15.47 billion in 2019. It also showed that about 9% of consumer accounts made up close to 80% of that revenue. University Credit Union said this study highlights the economic disparity of the fee structure for some consumers who frequently see overdraft fees as their available balance drops to a negative balance.
"This is one more example of how UCU is leading the industry towards more equitable treatment of all banking consumers and promoting greater economic inclusion for its members," the credit union said.
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Regulators consider banning ‘abusive’ overdraft fees
The CFPB is becoming increasingly critical of overdraft fees, calling the charges "abusive." The CFPB’s report showed that banks have become increasingly reliant on revenue from such fees.
"This welcome research yet again illustrates the need to put an end to abusive overdraft fees – especially given that these fees are borne predominately by those who can least afford them," Rachel Gittleman, Consumer Federation of America financial services outreach manager, stated in December 2021.
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