"WAR" Against Overdraft Fees is Brewing.

I don't mean to nag, but even Wall Street is becoming concerned about the effect on bank earnings due to changes in overdraft fee regulation. An article that appeared in the July 25th Wall Street Journal indicated that 54% of TCF Bank's noninterest income is from "service charges" (read NSF fees) and that "TCF should let shareholders know the likely impact on earnings". Take a minute to calculate the potential impact of reduced overdraft fees on your bottom line. Please check with your doctor before doing this exercise, a high stress level is a likely outcome. Something like 90% of all credit unions would be in the red without fee income.

As I mentioned in my July 1st blog post, Congress has asked the Fed to restrict NSF fees, and according the the Journal, the Fed is responding. As we all know, when the APR on an NSF fee relative to the amount overdrawn is calculated, it can be astronomical. Politicians aren't turning a blind eye to overdraft fees any longer, and the Feds have proven that they can move fast when implementing new Regs. In addition, battling "unfair" fees is exactly what the President's new Consumer Financial Protection Agency is being set up to do.

A two-fold action plan: 1. Get your state League and lawmakers involved in the issue. Let them know that reduced overdraft fees will lead to higher fees on other services, lower rates on savings, and higher borrowing costs. 2. Be prepared to find ways to make up the lost fee income. The Fee War is coming, be prepared for the battle.

A Soapbox Moment . . . a little self-regulation might be in order. Yes, members can benefit from Courtesy Pay if used properly. No, we shouldn't "mother" our members, they should be allowed to make their own financial decisions. But let's be honest, some of our less-fortunate members can get themselves in trouble with Courtesy Pay and may be too embarrassed to ask for help . Not everything that is legally permissible is ethical.