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Staatz warns overdraft bill has consequences
WASHINGTON (12/4/09)--Consumer groups that favor overdraft
Rod Staatz, CEO of SECU in Linthicum, Md., talks about unintended consequences of a legislative proposal to ban some overdraft protection plan practices. He was addressing this week’s Consumer Federation of America conference on financial services. (CUNA Photo)
protection reform legislation need to be mindful of negative unintended consequences, cautioned Rod Staatz, CEO of SECU in Linthicum, Md., during a panel discussion at this week’s Consumer Federation of America conference on financial services. “Any time you propose legislation, you must think it through and be sure there are no unintended consequences, which could ultimately harm consumers in the end,” said Staatz, who also serves on the Credit Union National Association (CUNA) board. He participated in a CFA panel on overdraft protection issues and policy consequences along with Jean Ann Fox, CFA’s director of financial services, and Barbara Ryan, deputy to the vice chairman of the Federal Deposit Insurance Corp. Ryan summarized the results of a November 2008 FDIC study on use and cost of overdraft programs among FDIC-insured institutions. Fox explained why CFA supports overdraft protection legislation proposed by Rep. Carolyn Maloney (D-N.Y.) and Sen. Christopher Dodd (D-Conn.) over recent regulations adopted by the Federal Reserve Board requiring opt-in for ATM and debit transactions. "We welcome the Fed’s rule, but it doesn’t go far enough,” Fox said. Panel moderator Will Ogburn of the National Consumer Law Center noted the Fed rule only applies to one-time rather than recurring charges, does not cover checks, and places no limit on the number or size of overdraft fees. Staatz emphasized the Fed’s rules are preferable to the legislation, which contain some elements CUNA could support but also include provisions that would be extremely problematic for credit unions, such as limiting the number of a consumer’s ODP fees to one a month and six a year. The cost and compliance issues raised by theses legislative provisions could drive responsible providers like credit unions away from offering a service their members value, he explained. Noting again that many institutions offer the product responsibly, Staatz outlined the steps SECU takes to intercede when members over-use the service. He also highlighted voluntary ethical guidelines the CUNA board establisehd in 2004. Rep. Maloney, who addressed the CFA conference prior to the overdraft panel, called the new Fed rules “tremendously important” but said her bill is broader than the Fed approach and is still necessary.


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