WASHINGTON -
Mary Cunningham, president of USA FCU, said an attempt to count the overdraft, or bounce fees in the Annual Percentage Rate could prevent many credit unions from offering the service.
"Depending on how the fee is defined and included in APR calculations, it could easily exceed the credit union's statutory 18% interest rate ceiling," said Cunningahm, who was representing CUNA before the House Financial Institutions subcommittee.
Cunningham was testifying just an hour after New York Rep. Carolyn Maloney, chairman of the subcommittee, joined the credit union-backed Center for Responsible Lending in releasing a study showing that banks and credit unions now earn more from overdraft protection fees then they lend out to cover overdrafts-a whopping $17.5 billion in 2006.
Maloney has introduced a bill that would bring overdraft fees under the Federal Reserve's Truth in Lending regulation and require disclosure of an APR for the amount of the fees. It would also make it easier for consumers to opt out of overdraft protection and more prominently disclose fees.
The same day that Cunningham gave testimony, the credit union-backed Center for Responsible Lending released a study showing that overdraft protection fees charged by credit unions and banks exceed the amount of money credit unions and banks lend to cover actual overdrafts.
With thousands of credit unions now offering some kind of overdraft protection, the issue could embarrass credit unions on Capitol Hill. The Center, an affiliate of Self Help CU, has joined Rep. Carolyn Maloney in calling for a move to disclose all overdraft protection fees as part of the Annual Percentage Rate.
