Even Credit Unions Are in on Banks’ Junk Fee Racket
The credit union motto is “people helping people.” Yet credit unions, like big banks, collect billions of dollars through excessive overdraft fees — and the Trump administration just made it easier for them to do so.
Navy Federal Credit Union collected more than $724 million in overdraft and nonsufficient fund fees last year, more than any other credit union. (Wikimedia Commons)
Federal credit unions are often seen as the kinder, gentler version of big banks, since they are designed to serve members of modest means without a profit motive. But data from a new reporting rule we reviewed found that the largest credit unions made nearly $4 billion charging their members unnecessary overdraft fees last year.
Now, following industry lobbying on the issue, President Donald Trump’s top credit union regulator has revoked the junk-fee reporting rule, meaning credit unions will have more leeway to hide how they bilk consumers than the corporate banks to which they’re supposed to serve as an alternative.
The decision to hide credit unions’ junk-fee revenue preceded a March 27 Senate vote to overturn a government rule that cut the fees large banks and credit unions could charge consumers for spending more than they had in their accounts. The rule, finalized in December, capped the fee at $5, down from an average of $35 per overdraft.
If the House agrees to kill the rule, both banks and credit unions will once again have free rein to charge consumers far more than the negligible institutional cost of these overdrafts, and US households will lose out on an estimated $5 billion in junk-fee savings each year.
The credit union motto is “people helping people.” But the move to repeal the institutions’ junk-fee disclosure rule means they will likely be less accountable to consumers than traditional banks, which still have to report overdraft fee revenue, said Adam Rust, director of financial services for the consumer advocate group Consumer Federation of America. Such disclosures have been leading to corporate changes; after regulators began publishing junk-fee data, a number of large banks lowered or eliminated their fees.
“We’ll have a system going forward where banks are under an obligation to report the [overdraft fee] data to the public and the credit unions aren’t,” Rust told us. “That’s in a direction that goes entirely contrary to where the relationship should be between those two types of institutions. It should be in a way that obligates credit unions to a higher standard.”
Under President Joe Biden in 2024, the National Credit Union Administration (NCUA), the regulatory body overseeing credit unions, began collecting and publishing revenue data for overdraft and nonsufficient fund fees from credit unions with more than $1 billion in assets.
The credit union regulator found that these credit unions collected more than $3.8 billion in overdraft and nonsufficient fund fees, which accounted for between 2 and 5 percent of revenue for most credit unions. The amount was $2 billion shy of what banks with more than $10 billion in assets reported collecting in 2023.
According to a review of the credit union data, the country’s largest credit union, Navy Federal, which services veterans and active duty service members, collected more than $724 million in overdraft and nonsufficient fund fees last year, more than any other credit union.
In comparison, the country’s second-largest credit union, State Employees’ Credit Union, which services state employees in North Carolina, collected $0 in overdraft fees and $24 million in nonsufficient funds fee revenue.
Mountain America Credit Union, the ninth-largest credit union, with more than $19 billion in assets, which services customers in the Rocky Mountains region and the Southwest, collected the second-most junk fees, with more than $87 million in revenue. This was followed by Suncoast, the tenth-largest credit union, with more than $18 billion in assets, servicing members mostly in Florida, with more than $43 million in junk fee revenue.
After just one year of collecting the data, the Trump administration decided to reverse course. On March 3, NCUA chairman Kyle Hauptman, a former economic adviser to Senator Tom Cotton (R-AR) who was appointed by Trump to head the agency in January, said in a statement that the administration will no longer publish credit unions’ overdraft fee revenue beginning on March 31. Hauptman cited “unintended consequences” of collecting the data and the need to relieve “the regulatory burden on credit unions.”
“The previous data collection policy incentivized credit unions to avoid serving the needs of low-income and underserved communities,” Hauptman said. “These fees can be the best option in a bad situation, saving money and protecting individuals’ credit scores. Overdraft also protects people from much higher costs imposed by their local governments.”
Now the publishing of credit union overdraft data will “regrettably end,” and although the information will still be collected by the agency, it could be shielded from Freedom of Information Act requests, said NCUA board member Todd Harper.
“If credit unions are to live up to their statutory purpose of supporting the financial needs of ‘people of modest means’ and the credit union movement’s oft-touted ‘people-helping-people’ philosophy, then credit union member-owners should have access to this basic market information, so they can make better decisions about how and where to deposit and access their hard-earned money,” Harper said in a statement.
“People Helping People” Hide Junk Fees
Credit unions operate similarly to banks, allowing customers to deposit and withdraw money, offering loans and mortgages, and providing other similar services. But credit unions are not-for-profit institutions, meaning they qualify for federal tax exemptions, and their customers, called “member-owners,” technically own a piece of the credit union. This entitles credit union customers to vote for their board of directors and, for some, collect dividends.
Because of their not-for-profit status, many credit unions return profits back to their customers in the form of high savings account rates, low fees, and low interest rate loans.
The United States’ first credit unions were established in the early 1900s as a response to a lack of services in underserved communities. The institutions were overseen by a series of regulators until 1970, when Congress created the National Credit Union Administration to establish an independent agency that insures deposits in a similar way to how the Federal Deposit Insurance Corporation insures bank accounts. The agency is run by a three-member board of directors, which is appointed by the president and confirmed by the Senate. The president also selects the chairman of the board, who has broad powers.
Many credit unions are still highly regarded by their members and have excellent reputations, Rust said, but recently credit union executives have started to rake in higher executive compensation packages than previously recorded.
“In the credit union space, we are seeing both a rise in total executive pay and incentive-based pay,” said NCUA board member Tanya F. Otsuka in a July 2024 speech.
She added that industry data from 2023 shows that credit union executives’ compensation rose by 8 percent. “Industry experts have noted that historically, credit union CEO pay grew annually by three to four percent.”
The Trump administration’s decision to stop publishing credit unions’ junk-fee profits was applauded by America’s Credit Unions, a lobbying group that serves as the “unified voice” for the industry, which spent nearly $12 million in 2023 and 2024 lobbying Congress, the NCUA, and other regulators on the collection and disclosure of “credit union overdraft and [nonsufficient fund] fee revenue data,” among other matters, disclosures show.
“Credit unions offer overdraft programs in safe, clearly disclosed terms to members who may need help to make ends meet, but having this data publicly accessible could lead to consequential misunderstandings,” said America’s Credit Unions president Jim Nussle in a statement.
The trade association sued the Consumer Financial Protection Bureau (CFPB) in December 2024 over the bureau’s rule to cap overdraft fees at $5 for financial institutions with more than $10 billion in assets.
“The CFPB issuing its final rule on overdraft nearly a month before the Trump Administration is set to begin is risky behavior for a regulator and for the consumers they claim to protect,” said Nussle in a December statement. “Everyone should have access to services that allow them to make ends meet without having to choose between buying groceries or paying a utility bill.”
Even without an overdraft cap in place, financial institutions may be inspired to lower their junk fees if they’re required to disclose their revenue from such schemes.
“By putting a spotlight on these high fees, it introduces accountability, it changes how the public should look at credit unions,” Rust said. “Credit unions in general have an excellent reputation and most of them are good, but there are these outliers. This kind of information can make a difference to give the consumer a better sense of what kind of financial institution they’re about to use.”
“Punish No Evil”
Ending the credit union transparency rule comes as the House weighs whether to overturn the CFPB rule capping overdraft fees at $5, which would allow financial institutions to charge much higher penalties.
In the past, banks charged overdraft fees for consumers who wrote bad checks or overdrew their accounts because the process could be costly for the institutions. But in the digital age, that is mostly no longer the case, experts say. Today banks can simply deny the transaction in real time.
Senator Tim Scott (R-SC), chair of the Senate Banking Committee, has defended banks’ ability to charge junk fees, stating that many Americans rely on them to “make ends meet.”
“I’m proud to lead the effort to overturn this misguided rule and protect Americans’ access to important financial services,” Scott said in a February 13 press release.
Scott has received more than $5.3 million in campaign donations from banking, securities, and investment interests since 2009. Scott, a self-proclaimed “raving credit union fan,” previously served as a credit union board member for seven years before entering politics.
What’s more, Trump issued an executive order in February forcing independent agencies like the NCUA and the Federal Deposit Insurance Corporation to submit all proposed rules and regulations to an office controlled by Trump. The order follows a similar directive outlined in Project 2025, a blueprint to radically reshape the government put forth by the Wall Street–backed, right-wing think tank Heritage Foundation.
Project 2025 calls for legislation to “merge the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Federal Reserve’s non-monetary supervisory and regulatory function,” in an attempt to “replace government regulation with competition and market discipline.”
The CFPB, which the Trump administration has worked diligently to dismantle, announced that starting on March 30, the agency will no longer enforce a payday lending rule that prohibited lenders from charging a borrower’s account more than two times for a repayment.
Experts say these moves are part of Trump’s larger deregulatory efforts that will be detrimental to the economy and consumers alike.
With the decision to dismantle the payday lending rule, “the CFPB has sided with bottom-feeder payday lenders at the expense of vulnerable borrowers struggling to make ends meet,” said Rust with the Consumer Federation of America. “The CFPB is designed to be a law enforcement agency. A policy of ‘hear no evil, see no evil, punish no evil’ is a sure-fire way to promote lawless behavior.”