Tanu Henry and Joe W. Bowers Jr. | California Black Media
Last week, Sen. Steven Bradford (D-Inglewood) introduced Senate Bill (SB) 1075, legislation intended to cap the charges that credit unions can impose on consumers for overdrafts or non-sufficient funds (NSF).
“Financial institutions should act responsibly when imposing fees on their members. They should not build a business model that thrives on the misfortune of customers,” said Bradford, who is Vice Chair of the California Legislative Black Caucus (CLBC).
“That’s exactly what some credit unions are doing,” continued Bradford. “Fees should not be excessive or target the most vulnerable customers.”
According to SB 1075 language, the bill would require credit unions to extend a “five-day grace period” to customers to rectify a deficiency before a state-chartered credit union can assess a fee.
“Most credit unions charge between $20 and $35 for each fee,” reads a press release issued by Bradford’s office. “Overdraft protection is an opt-in program where the financial institution will provide funding to complete a transaction when the member has insufficient funds. Non-sufficient funds fees are charged when a transaction is denied by the credit union due to a low balance.”
According to a March 2023 Department of Financial Protection and Innovation Report (DFPI) report, credit unions are earning a significant amount of their revenue from fees.
“We have long known that overdraft fees can be a pernicious and often predatory practice that harms consumers who can least afford to pay them,” said Senator Monique Limón (D-Santa Barbara), Chair of the Senate Banking and Financial Institutions Committee.
“I applaud Senator Bradford for taking the lead on this issue and look forward to working with him, consumer advocates and financial institutions to collaboratively enact strong protections for users of overdraft services,” Limon added.