Overdraft protection programs are currently undergoing “dramatic” transformations, but there are ways to rethink noninterest income sources, according to a new report from Filene.
The report, “Overdraft Protection Programs: Credit Union Best Practices,” cites shifting consumer behavior and expectations, fintech firms gaining market share and a disparity of impact on lower income members and people of color for transformation of ODP programs.
ODP programs have become a reliable source of noninterest income for many credit unions, especially small institutions, but in the wake of the COVID-19 pandemic and recession, many credit unions are eliminating or restructuring their ODP programs, as well as their fees and noninterest income mix overall, according to the report. One reason: shifting consumer behavior and expectations are sparking a public re-evaluation of the purpose of fee-based services like ODP, especially as recognition grows that such fees typically affect a small group of members who tend to have lower incomes and weaker credit histories.
The report identifies how credit unions can reimagine overdraft protection, where else can they look for noninterest income to replace overdraft fees and highlights key findings and next steps for credit unions to rethink their noninterest income sources.
The report is available to download on the Filene website (registration is required).