By Ray Birch
PASADENA, Calif.–One credit union that eliminated overdraft fees years ago has now removed NSF charges and says the decisions are not only better for members, but the credit union’s long-term bottom line, as well.
As CUToday.info reported, Wescom Credit Union has become the latest CU to say it is no longer charging non-sufficient funds fees.
“We believe in doing what is right for our members,” said VP-Deposit Operations Ralph Bautista. “They always come first in every decision we make. We also understand the microscope that overdraft and NSF fees have been under, and we decided to stop these practices ahead of any mandate.”
The latter is a reference to plans the CFPB, which has proposed that overdraft fees be capped.
More important, added Bautista, the $6.476-billion Wescom understands that due to a “simple oversight” members should not be penalized.
“We’re dedicated to building better lives for Californians and the elimination of the NSF charges reinforces our founding principle of people helping people,” he said.
The Real Goal
Bautista agreed it’s better to make such pricing decisions when the credit union is not forced to make them, and find ways over time to make up the revenue, if that is a goal.
“Our position, ahead of any mandate, is to do what's right for the member,” reiterated Bautista. “At Wescom, NSF charges affect 2.13% of our total membership. Obviously, it's a small population. But this small population will not have to dig themselves out of a negative account because of non-sufficient funds charges. We do offer other ways for members to avoid overdrafts.”
Ralph Bautista
The credit union stopped charging for overdraft fees at the end of 2020. Its non-sufficient funds fee was $30.
Offsetting Lost Revenue
How is Wescom CU offsetting the loss in OD income?
“We have other services. Whether it's our CUSO to look to generate more revenue for us…The other aspect of this is we have now placed our members in a better financial position,” Bautista said. “We expect to have less charge-off accounts. We expect our members to be more engaged with us.”
Wescom reported $9.5 million in net income at mid-year.
Sending a Message
By making the move Bautista contends Wescom is sending a strong message to its membership that the credit union has their best interests in mind, looks out for them when other FIs do not, and as a result, becomes the PFI for more account holders.
As CUToday.info has extensively reported, many financial institutions nationally have eliminated or reduced overdraft charges, but many competitors in Wescom Credit Union’s greater Los Angeles market still charge a high price for the service, Bautista noted.
“We think our members will do more business with us,” Bautista said of the strategy. “They will refer their friends and family to us, And in the end we become a better, stronger institution. We’re basically a straightforward, straight-shooting credit union that cares about the member, and that will drive more business in the long run.”
The Day of Reckoning
Bautista acknowledged the day may be coming when credit unions that are still charging for NSFs and overdrafts may be told by the CFPB or NCUA to stop the practice. He said that Wescom, by being proactive, not only avoids being forced to have to scramble in response to such a mandate, but it also allows the organization to focus more clearly on its future.
“We can focus on continuing to serve our members, providing better products and services for them,” Bautista said.