ESL Federal Credit Union in New York slashes overdraft fee

ESL Federal Credit Union in Rochester, New York, has reduced its charge for overdrafts by individuals and businesses from $25 to $5.

It joins a growing list of banks and credit unions to announce they have cut the amount they assess for transactions that overdraw customer accounts.

“While account balancing mistakes happen, fees should not be driving people into further financial strife when they already had insufficient funds in their accounts. We are committed to taking actions in support of our purpose and believe this overdraft fee reduction to five dollars sets a new standard for what consumers should expect to pay,” ESL FCU President and CEO Faheem Masood said in a press release Monday.

The $8.7 billion-asset credit union cited a study by Bankrate that showed the average overdraft fee among U.S. banks and credit unions to be $33.58. Roughly 8% of consumers who overdraw their checking accounts more than 10 times a year pay 74% of all overdraft fees nationally, a separate study conducted by the Consumer Financial Protection Bureau found.

In addition to covering basic transactions where there is not enough money in the account, the $5 fee will apply to checks, bill pay and ACH transfers.

Other credit unions have announced reductions to some fees to help members who have been adversely affected by COVID-19.

For example, the $588 million-asset Clackamas Community Federal Credit Union in Milwaukie, Oregon, announced in April that it was reducing fees from $27 to $12 each for overdrafts, NSF, returned items and stop-payment orders.

The $185 billion-asset Citizens Financial Group earlier this month rolled out a program that automatically reverses overdraft fees if customers deposit or transfer enough money to bring their accounts to a positive balance by the end of the next business day.

The National Credit Union Administration is currently contemplating a rule that would remove the strict 45-day limit for members to make a deposit or obtain a line of credit to cover a negative balance.

ESL has nearly 400,000 members.

“We regularly analyze and evaluate how ESL can help improve their financial health, and from our analyses, we know that there are members who are incurring these fees routinely,” Caytie Bowser, ESL’s director of product development and management, said in the press release.