The P.A.

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

We Are Part of the Solution

On March 23rd, 2015, posted in: Uncategorized by


One of my colleagues penned the following letter to Senator Elizabeth Warren after hearing her speak at a credit union conference. Senator Warren has expressed concern for the need to further regulate overdraft protection/courtesy pay programs. We vehemently disagree with her. These were my co-worker’s comments, which brilliantly articulated our position and the negative impact such an action would have on our members. 

Thank you for taking the time to speak at the Governmental Affairs Conference in DC last week. It was a pleasure hearing about your support of credit unions and how we provide real value to our members and our community.

During your speech, you said: “If credit unions can show me regulations of supervisory practices that are unnecessary, then I’m ready to work together to find a better approach.”

At St. Louis Community Credit Union, we concur with your efforts to protect consumers from deceptive practices pertaining to Overdraft Protection. We also believe that, as a CDFI and a Low-Income Designated Credit Union, we have a model Overdraft Protection program that provides the consumer with low-cost access to the money they need to take care of their basic necessities. So, rather than blow up the product altogether, could you base a potential new rule on how we (and other responsible financial institutions) offer the product? We would be happy to share it with you in detail.

In the meantime, here is a snapshot of our program:

  • The average cost to process an overdraft is $12.50; we charge just $18 – and give members a full 30 days to pay us back without any additional charge.
  • We clear our items in the order received. 
  • Less than one percent of our 50,000 members have chosen to opt out of the service.
  • On any given day each month, we carry between $800,000 and $1 million in funds that have been overdrawn by our members. This is a staggering amount, and it underscores the degree to which our members rely on this valuable service to make ends meet. It also demonstrates the tremendous risk involved in providing this service to our members.
  • Our members use it to pay for necessities, such as groceries, prescriptions, rent and utilities. They do so out of need, not because they can’t balance their checkbook.

Credit unions are not the problem. We are part of the solution. If you put regulations in place that drive well-meaning institutions like ours out of the community development business, how are the people we serve going to survive? If not us, who is going to fill the void and provide low-cost banking options to the disenfranchised?

When you helped establish consumer protections through the Consumer Financial Protection Bureau, you wanted clear rules that “give a break to those who provide transparent, valuable products” to consumers. I hope that will be the case regarding any new rules for Overdraft Protection.

Would you consider our Overdraft model as a solution to the problem? If not, would you consider carving out an exemption to the rule for credit unions? Or, if not all credit unions, then at least Community Development and/or Low-Income Designated Credit Unions?

Thank you for your consideration.

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