The answer is relatively simple: Give Consumers a Choice!
If the consumer doesn’t want overdraft coverage, they can opt-out of the overdraft program at any time. NCUA has included information on their website (www.ncua.gov) specifically addressing overdraft programs and NSF fees. One of the first points they highlight is that overdraft coverage is optional. Having overdraft protection is a personal choice, and a member can opt-out any time. The reality is the consumer has already been given an opportunity to choose. Since 2010, when Regulation E went into effect, financial institutions required an affirmative “opt-in” from the consumer to pay and charge for everyday debit card as well as ATM transactions. Remember, consumers need access to short-term liquidity to fill a void between paychecks or to cover an unexpected bill or expense.
Whether that buffer covers a $75 grocery bill or a $500 car repair bill, the ease and convenience of an overdraft program helps the member. And, like many services in modern day society, the ease and convenience come with a service fee. Just like Instacart and DoorDash.
Removing and dismantling overdraft programs will not eliminate the consumer’s need for this service. It simply limits their available options. Consumer choice is critical in the financial institution space, and those choices should include multiple alternatives such as a sweep from a savings account, a personal line of credit, a short-term small dollar loan as well as courtesy overdraft coverage.