A new report from the Financial Health Network said a new reporting requirement for credit unions reveals that the impact of overdraft and NSF fees is much higher than once thought.
Early in 2024, the National Credit Union Administration (NCUA) mandated that credit unions with more than $1 billion in assets must report overdraft and non-sufficient fund (NSF) fee revenue as separate line items in their quarterly filings. That dictum prompted the Financial Health Network to analyze reports for the four quarters of 2024 to get a more holistic view of the total overdraft and NSF fees.
That raised those fees by $4 billion.
“With these revised figures, we now estimate that consumers paid $11.8 billion dollars in overdraft and NSF fees in 2023 and $12.1 billion in 2024, compared with our previous 2023 estimate of $7.9 billion,” authors Hannah Gdalman, MK Falgout, and David Silberman wrote. “Previous models, which were developed without comprehensive and up-to-date credit union data, understated these costs – and the whole overdraft/NSF picture – by nearly $4 billion. Our updated analysis estimates that consumers paid $5.4 billion in overdraft and NSF fees at credit unions in 2024, up from $5.3 in 2023.”
Banks with more than $1 billion in assets have been required to include such a line for a decade. The Financial Health Network said it has used CFPB’s 2019 estimates for credit union and small bank fees as a starting point
However, unlike the CFPB, the Financial Health Network didn’t assume fee revenue percentages held constant. It assumed such revenue followed the same trend as small banks included in publicly reported data
“Based on this approach, the FinHealth Spend Report 2024 estimated that in 2023, consumers paid $7.9 billion in overdraft/NSF fees, with 82% attributable to overdraft/NSF fees at banks and 18% attributable to overdraft/NSF fees at credit unions,” the report states.
The added transparency is short-lived, however, as the NCUA has reversed this decision. Beginning in 2025, overdraft revenue data for individual credit unions will no longer be published.
“(That provides) an important snapshot of the fees charged across the market,” the report states. “While these credit unions represent only around 10% of credit unions nationwide, they collectively account for approximately three-quarters of credit union members and approximately 80% of the assets and deposits held by all credit unions as of the fourth quarter of 2024.7 (In contrast, the data the CFPB had collected in 2015, and on which it based its subsequent estimates, covered only six credit unions with assets above $1 billion.)”
The new data allowed the Financial Health Network to upwardly revise its estimates of the amount of overdraft and NSF fees paid in 2023 and 2024 by $3.8 billion. The Financial Health Network said the new data suggests the CFPB may have underestimated the share of overdraft and NSF fees attributable to credit unions in 2019.