Starting in January, California-based credit unions must notify customers every time they receive an overdraft fee.
Beginning in 2026, those fees will be limited to $14 or less. Many credit unions currently charge upwards of $25 per overdraft fee.
Why it matters
Credit unions chartered in California collected more than a quarter-billion dollars in overdraft fees last year, according to data collected by the state.
Lawmakers took notice and wanted to put up guardrails.
In recent years, big banks received sharp criticism for their overdraft practices. As a result, many of them reduced or eliminated the penalties.
Now, credit unions are facing similar scrutiny.
What people are saying
“Too often, overdraft fees can push people out of the banking system," said Susan Weinstock, CEO of the Consumer Federation of America. "We want people to stay in the banking system — we know ultimately that’s better for financial empowerment and financial inclusion.”
Closer look
The state Legislature referenced KPBS’ reporting when deliberating the new law.
A KPBS investigation late last year revealed that several San Diego County credit unions relied on overdraft fees as an important source of revenue. In March, KPBS found Oceanside-based Frontwave Credit Union enrolls Marine recruits during boot camp and reaps millions in overdraft fees every year.
Frontwave has denied any wrongdoing. CEO Bill Birnie said the credit union's overdraft program is a benefit to customers who run out of money at the end of the month.
Members of Congress launched an investigation into Frontwave following KPBS’ reporting and urged the credit union to change its fee policies.
