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Economy

Federal agency reveals how much credit unions collect in overdraft fees

An advertisement outside a San Diego County Credit Union branch in this photo taken November 20, 2023.
Matt Bowler / KPBS
An advertisement outside a San Diego County Credit Union branch in this photo taken November 20, 2023.

The nation’s largest credit unions collected $916 million in overdraft fees during the first three months of 2024, according to the National Credit Union Administration.

A report released last week by the federal agency gathered data from 443 credit unions, including some operating in San Diego, with at least $1 billion in assets.

For years, the federal government has published data on overdraft fee income at the nation’s biggest banks. But how much credit unions collect has largely remained a mystery because they have not been subject to the same regulatory oversight as commercial banks.

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The new report from the National Credit Union Administration (NCUA) marks the first time the federal government has published wide-ranging data on overdraft fee income at credit unions. The nationwide assessment reveals how some of them have grown reliant on these fees as a source of revenue — despite their nonprofit, friendly-neighbor image.

“An overreliance on any one revenue stream — including overdraft and [non-sufficient fund] fees — can impact the financial health of a credit union, their members, and the system as a whole,” said NCUA Board Member Tanya Otsuka during a press briefing last week.

In the banking industry, customers receive an overdraft fee when they overdraw their checking account and the transaction goes through. Nonsufficient fund fees occur when a checking account is overdrawn and the transaction is declined. This story refers to the penalties collectively as overdraft fees.

Last year, California became the first state to publish overdraft fee data on state-chartered credit unions. The 100-plus credit unions collected more than $250 million in overdraft revenue in 2022. The state Department of Financial Protection and Innovation has not released data for 2023.

A KPBS analysis of the California data showed several San Diego-based credit unions relied on the fees as a key revenue source.

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Unlike the state data, the NCUA report also included figures on federally-chartered credit unions. NCUA compiled a spreadsheet with the first-quarter overdraft data, which can be viewed here.

America’s Credit Unions, an industry trade group, opposed the NCUA’s release of the overdraft income data.

“There are significant reputational risks that are likely to quickly arise with the public disclosure of such information,” wrote Carrie R. Hunt, Chief Advocacy Officer for America’s Credit Unions, in an April letter to the agency.

She added, “This information is likely to be spun in a misleading and potentially inaccurate way, resulting in irreparable harm to the positive reputation credit unions have worked so hard to achieve.”

A closer look

The NCUA’s data includes fee totals from a number of credit unions based in San Diego County.

San Diego County Credit Union (SDCCU), which has over 430,000 members, generated more than $4 million in overdraft revenue in the first quarter of 2024, the NCUA report showed.

The KPBS analysis of California data showed SDCCU collected nearly $18 million in overdraft fees in 2022, more than any other state-chartered credit union based in the county.

A separate KPBS investigation into Oceanside-based Frontwave Credit Union found the company systematically enrolled Marine recruits who came through boot camp in San Diego. The company then charged the young service members millions in overdraft fees. In 2022, the 123,000-member credit union collected nearly $8 million in overdraft fees.

Members of Congress, led by Sen. Elizabeth Warren (D-MA), launched an investigation into the credit union in April following KPBS’ reporting. Frontwave has denied wrongdoing in statements to KPBS and lawmakers.

The credit union collected $1.8 million in overdraft fees during the first quarter of 2024, according to the NCUA report.

The totals were much smaller for Mission Fed, a San Diego-based credit union with just over 300,000 members. Mission Fed collected less than $600,000 in overdraft fees in the first quarter — putting it low on the list compared to its similarly sized competitors nationwide, the NCUA report showed.

Virginia-based Navy Federal Credit Union is another credit union with a big presence in San Diego County. The company primarily serves members of the military and their families. In the first three months of 2024, the company generated nearly $170 million in overdraft fee revenue nationwide — the most, by far, of any credit union in the NCUA report.

Navy Federal is also the country’s largest credit union by a wide margin with more than 13 million members.