Credit Unions may be member owned, but that doesn't mean members are exempt from fees. A research note from the NCUA (January 16, 2025), disclosed two major findings.
1) In spite of many credit unions reducing or eliminating certain fees, total fee income at CUs increased 2% between September 30, 2023 and September 30, 2024.
2) increased overdraft and NSF fees do NOT lead to lower fees for other services, nor do they go to “subsidize” better interest rates.
In this issue we list 52 credit unions that each charged fees in excess of $19 million during the first nine months of 2024. Some may surprise you.
Credit Union Fees: Can’t Blame Overdrafts This Time
Long-time readers of Jumbo Rate News may remember an article from 2013 entitled “Opting-In Can be Costly” (JRN 30:23). It had been three years since financial institutions were no longer allowed to charge overdraft fees for ATM withdrawals or debit card transactions without permission.
A Consumer Financial Protection Bureau (CFPB) report (June 2013) found that accountholders who previously had been heavy over-drafters were able to save, on average, $450 in the second half of 2010 alone, simply by not opting in for overdraft protection on these transactions. In 2011, the average account fee per accountholder, was $196 for those who opted in; it was only $28 for those who did not.
The opt-in rule applies to both bank customers and credit union members, but this week our focus is on credit unions. Members must opt-in to be charged for the “privilege” of having a payment processed when it exceeds the account balance. This is an overdraft fee. Nonsufficient fund (NSF) fees, conversely, are levied when a transaction is declined because it exceeds the balance. No opt-in is required for NSF fees.
Since 2013, there have been many notable banks and credit unions choosing to either lower overdraft protection fees or eliminate them altogether. (Most recently, 5-Star LAFCU, Lansing, MI (68632) lowered both its overdraft and NSF fees from $32 to just 99 cents effective January 27, 2025.) In spite of these reductions/eliminations, fee income at credit unions increased 2% in the year-over-year.(Source: NCUA Research Note (Jan 16, 2025))
With $1.1 billion in assets and year-to-date fee income (through 9/30/2024) of $5.372 million, LAFCU is nowhere near the highest charger of fees when looking at either total fee income or fee income per member ($72.54). It is, however, higher than the overall credit union average of $52.36 per member.
The 52 credit unions listed on page 5 each charged fees in excess of $19 million during the first nine months of 2024. Some of these credit unions you would expect to find on this list. 5-Star Navy Federal Credit Union, Vienna, VA (5536), for example, is the largest credit union in the nation. Boasting more than $180 billion in assets and membership exceeding 14 million, it makes sense that Navy FCU would bring in more fee revenue than any smaller credit union.
Navy FCU’s year-to-date (YTD) fee income was indeed high, at $657 million. However, when the number of members is taken into consideration, Navy FCU fee income averages just $46.80 each. Despite its name, Navy FCU is open to all branches of the military, employees of the Department of Defense, Veterans and their families. Bauer is always pleased to see a financial institution that caters to our armed forces charging lower fees than the national average, but there’s an asterisk on this one. Last November (2024), Navy FCU was ordered to pay $95 million in refunds and penalties related to illegal (and often multiple) NSF fees from 2014-2020.
Prior to 2024, credit unions reported all fee income on one line of their quarterly call reports. Beginning with Q1’2024 filings, those with assets of $1 billion or more are now required to also itemize both overdraft and NSF fees. Since these itemizations are currently required only of the largest 444 credit unions, we did not include the itemized numbers on page 5.
The second largest credit union, 4-Star State Employees’ Credit Union, Raleigh, NC (66310), while just one-third the size of Navy FCU (with $57.229 billion in assets), reported YTD fee income of less than $14 per each of its 2.85 million members. That’s partly because State Employees’ CU does not charge any overdraft fees. SECU charges a $1 monthly maintenance fee. That accounts for $9 per member right there. It also collected almost $17 million in NSF fees.
Another credit union listed on page 5 sticks out: 4-Star Lafayette FCU, Rockville, MD (619) is a $2 billion asset credit union that generated nearly $28 million of fee income during the first nine months of 2024. As is often the case now, Lafayette FCU had no overdraft fee income and charged just $465,000 in NSF fees. That leaves $27.5 million in “other” fee income. That seems excessive, especially compared to other CUs.
In fact, when broken down per member, year-to-date fees at Lafayette FCU are among the highest in the nation at $479 per member. We took the liberty of downloading the fee schedule from Lafayette FCU’s website.
Some are typical:
- NSF or ACH return fee of $30;
- Debit card replacement fee: $10;
- Cashier’s check: $5;
- ATM withdrawals (non-LFCU owned ATMs): 5 free each months then $2 each.
Others are not so typical:
- Account closure fee (if closed within 6 months of opening): $25;
- Account research: $25 per half hour;
- Bad address on account: $10/mo;
- Dormant account fee: $10/mo;
- Tax levy or garnishment: $75 each;
- Incoming business wires: $15 each;
- Escheatment (if left unclaimed and account has to be handed over to the state): $50.
Excessive or not, Lafayette FCU would have posted a year-to-date loss of $25 million without these fees. As we can see, and the NCUA research also found, increased overdraft and NSF fees do NOT lead to lower fees for other services, nor do they go to “subsidize” better interest rates.
