NCUA Says CUs Need Not Send Notice For Every Insufficient Funds Charge

ALEXANDRIA, Va. – NCUA said federal credit unions are not required to send a notice each time a member incurs an insufficient funds, or overdraft fee, but the charge must be recorded in the subsequent periodic statement.

However, while not required to do so, NCUA guidance states it is a “best practice” to notify members promptly, the agency said in a legal opinion letter posted last week and issued to High Plains FCU, in Clovis , N.M.

Disclosures of NSF and overdraft fees are generally governed by NCUA’s Truth in Savings Act rule. NCUA’s TISA rule requires periodic statements to include a disclosure of any fees, including those for NSFs and overdrafts, debited from an account during the statement period.

An FCU must itemize the fees by type and dollar amount, said NCUA. A recent amendment to NCUA’s TISA rule also requires the disclosure of the total dollar amount of overdraft fees charged to an account in both the statement period and the calendar year to date. The total dollar amount includes per item fee, interest charges, daily or periodic fees or fees charged for maintaining the account in an overdraft status.

NCUA’s Letter to Credit Unions 05-CU-03, Overdraft Protection (Bounce Protection) Programs (February 2005), included interagency “best practices” guidance, which, among other things, recommends an FCU notify a member of an overdraft fee promptly. The guidance states it is a best practice to “promptly notify consumers when overdraft protection has been accessed, for example, by sending a notice to consumers the day the overdraft protection program has been accessed.” The best practices are, however, guidance and not regulatory requirements.