Carrie Hunt, NAFCU
By Ray Birch
ARLINGTON, Va.—Should CUs face increasing pressures on overdraft and debit interchange revenue in the future, checking may not be the first area to leverage to pass on some of the costs to members, suggests NAFCU.
As part of a CUToday.info series, several experts have been forecasting that the CFPB soon extending prepaid overdraft rules to checking, the result of which would be a dramatic reduction in overdraft revenue—one economist is even predicting the average overdraft charge will drop from $30 to $1. Other sources have also forecast a marked fall in debit interchange income due to some big box merchants moving to lower-cost PIN-less debit routing.
NAFCU SVP/General Counsel Carrie Hunt, who acknowledged that the CFPB’s focus on overdrafts combined with merchants increasing the use of PIN-less debit could reduce CU checking revenue in the coming years, thinks that many CUs will still hold the line on free checking—or at least try to.
Money Has To Come From Somewhere
“As we know, credit unions want to provide free checking to members if they can,” said Hunt. “They pride themselves on free checking and it’s what consumers want. That said, with the current environment that we are in—margins continually tightening—and if there are changes to debit interchange and overdraft revenue, credit unions have to manage that. That will cost money, and the money has to come from somewhere.”
Hunt said it is difficult to make a blanket statement that if things get tough “credit unions” will move away from free checking, saying decisions to do will vary greatly based on the individual CU’s balance sheet, product offerings, philosophy and membership makeup.
“I think that it is difficult to say whether CUs will charge for checking, or whether they will find savings elsewhere or increase fees in another area,” said Hunt. “When credit unions look at their business model, what their members want, maybe it makes sense for them to try to address the issue somewhere else.”
Maybe Little Choice
Ultimately, if revenue pressures persist, that may give CUs little choice.
“Eventually they may not be able to shift the costs and free checking could go away,” said Hunt.
It will likely be harder for smaller credit unions to shift the costs and maintain free checking, noted Hunt. “Typically smaller credit unions have fewer efficiencies and therefore it will be more difficult to manage this issue.”
Hunt added that credit unions do a good job of looking at their product offerings and making sound pricing decisions. “And it is NAFCU’s role to help create the best regulatory environment for credit unions to do that,” said Hunt, acknowledging the CFPB’s growing focus on overdrafts. “NAFCU continues to express to the CFPB that some of their regulations are potentially damaging to credit unions. We will continue to explain that credit unions are not the bad actors and that regulation can harm consumers.”