The P.A.

A weekly address from Patrick Adams,
President of St. Louis Community Credit Union

Overdraft Legislation Would Have Unintended Consequences

On November 23rd, 2009, posted in: Uncategorized by

A phrase getting a lot of attention around our office over the past couple of weeks is “unintended consequences.”  To define “unintended consequences” seems to be an exercise in stating the obvious.  But for the purpose of keeping us all on the same page, let me share some thoughts. 

Unfortunately, you realize as a decision-maker that “unintended consequences” have raised its ugly head when you hear (or think) these types of exclamatory phrases: “We did what?…uh-oh…you’re kidding me, right?”  And my personal favorite: “Hmmm…never thought of that.”  We’ve all been there at least a time or two and wish like heck we could get a do-over.  As they say: “The horse is out of the barn.” And that usually leads to the follow-up exclamation: “Time to wipe up the spilled milk.”

This past week, we asked thousands of St. Louis Community Credit Union members to reach out to their respective legislator(s).  Our call to action involved informing our U.S. Congressmen and Senators that the proposed legislation involving overdraft privilege would have “unintended consequences.”  Boy, would it!  By my count, a lot more bad than good.

While I’m a big fan of voting with my feet as a consumer (in other words, taking my business elsewhere when companies have bad service or charge too much), I also understand the need for legislators to insert themselves into activities from time to time to protect the consumer from unscrupulous activities found in the business world.

As an example, a large majority of banks has for far too long let fees and practices related to overdraft privilege get out of control.  They can’t help themselves – they’re for- profit.  Quite frankly, the American public (to some degree) must share in the blame game because too many of us did not vote with our feet.  Well, Congress has inserted itself with the idea to help.

Unfortunately, the “unintended consequence” of their proposed legislation would hurt many consumers and credit unions – not the least of which is St. Louis Community Credit Union:

Unintended Consequence #1: In an attempt to lower the consumer’s cost related to overdrafts, the result will more than likely be an increase in the fees associated with insufficient funds (i.e. bounced checks).  Why?  Retailers will attempt to clear a check twice and then add merchant charges when it doesn’t clear.  That totals up to three to five times more in fees versus the overdraft privilege of $15 charged by SLCCU.

Unintended Consequence #2: In an attempt to prohibit an overdraft through an ATM or debit card transaction, consumers would not have access to emergency cash when needed.  The result may be the need to use a more expensive payday loan to bridge the gap until the consumer gets paid.

Unintended Consequence #3: Less fees collected by SLCCU means less of all the good we provide to so many.

No kidding.  The “unintended consequences” of passing The Overdraft Protection Act of 2009 is that you and your family may ultimately be negatively impacted.  So tell ‘em “NO!”

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