NCUA and CFPB Warn Against Fee Practices Hurting Members

In 2024, regulators turned up the heat on overdraft and non-sufficient fund (NSF) fees, seeing them as harmful “junk fees” that can drive accounts into collections. The National Credit Union Administration issued guidance urging credit unions to address “Consumer Harm Stemming from Certain Overdraft and NSF Fee Practices”. Examiners began closely reviewing overdraft programs, particularly at mid-sized federal credit unions.

The NCUA emphasized that unreasonable or repetitive fees could push financially vulnerable members into deeper delinquency, and encouraged more lenient policies or accommodations. At the same time, the CFPB signaled plans to cap big-bank overdraft fees (proposing a $5 limit for large institutions) and published new guidance that treating many overdraft fees as finance charges under Truth in Lending – effectively closing what CFPB called an “overdraft loophole”.

This coordinated pressure led many credit unions to reexamine their fee structures. Some reduced or eliminated NSF fees altogether, while others enhanced grace periods or low-balance alerts. Collections managers welcomed the potential reduction in charged-off checking accounts, even as reduced fee income posed a budgeting challenge.

Takeaway: Overdraft fees moved from revenue tool to regulatory red flag in 2024, and collections teams are adjusting by focusing on member-friendly solutions to prevent fee-induced delinquencies.