By Samantha Beeler, President of LSCU

In recent weeks, dangerously mislabeled “junk fees” have been severely mischaracterized by policymakers. Many of them, however, have made the mistake of lumping in overdraft protection services with a litany of unrelated services and fees.

Ask the millions of Americans who rely on overdraft protection being readily available to get them through tight spots on the calendar and unexpected emergencies, and they’ll tell you that the service is anything but junk. And the fees that enable their financial institution to offer the service are among the most transparent of any in modern society.

Overdraft protection services are only available to members who directly opt-in to the service. Apprised of the service’s details from day one, the vast majority of members choose to opt-in, fully aware of the benefits. Take into consideration the alternative – going to a predatory payday lender where one could get charged interest rates up to 400%. Credit unions are the true consumer advocate – looking out for the members’ best interest and offering financial counseling and other resources to put consumers on a path to financial stability.

As member-focused and member-owned financial institutions, credit unions regularly evaluate the services they provide. Invariably, overdraft protection is hailed by members as an invaluable tool. And for good reason.

A stopgap service where a financial institution honors its member’s payments even with a negative balance, overdraft protection helps millions of consumers cover their bills or unexpected expenses. It provides financial guardrails for millions of Americans as they work to navigate an inflation-riddled economy, working to build a better life for them and their families.

The fees supporting overdraft protection cost far less than a bounced check or a missed payment. Some credit union members even build overdrafts into their budgets ahead of time, recognizing the value and convenience that the service offers to make ends meet when paychecks and bills don’t quite line up on the calendar. And while many members don’t regularly use the service, they still opt-in, gaining much-needed peace of mind knowing it’s there as a safety net if the unexpected should happen.

The alternative, as countless already-vulnerable Americans have discovered, can be ugly. Payday lenders, usually setting up shop in the same economically downtrodden and underserved communities that many credit unions serve, offer short-term loans at usurious interest rates.

With more payday lenders littered throughout our communities than McDonald’s locations, the financial model of preying on the weak and sending them into a fiscal death spiral of untenable interest payments is clearly profitable for their corporate backers, even as it devastates families and communities. Too many Americans have been condemned to bankruptcy because they answered the siren’s call for what was supposed to be a short-term microloan. But that could be the fate for millions more of our most financially vulnerable citizens if government meddling destroys the widespread availability of sustainable overdraft protection plans through their trusted financial institution.

Credit unions already take a myriad of consumer-friendly steps to further help their members manage their money, including providing free automatic overdraft protection with savings balances, offering grace periods enabling them to bring an account positive, and setting minimum transaction amounts needed to be surpassed in order. And with the widespread availability and adoption of digital services, members have easier access to far more information about their account balances, transaction history, and services offered than ever before, all in the palm of their hand. Credit unions are also proud champions of financial literacy education, offering numerous tools to help members make decisions about how to manage their money the way that best fits their unique needs.

As member surveys and the opt-in percentages strongly attest, overdraft protection is a service that the members themselves are huge proponents of keeping intact. With payday lenders surely licking their chops at the prospect of regulatory overreach giving consumers no other option when facing a temporary lapse in payments, it’s clear where the real junk fees are hiding.

Following the recent Supreme Court decision in support of its funding mechanism, the CFPB may feel newly emboldened to flex its regulatory muscle and push through more ill-considered rules. This would be a costly mistake, potentially harming millions of the consumers the bureau is supposedly designed to protect.

Further government meddling in a critical service overwhelmingly preferred by credit union members would prove detrimental to those who need it most, including low-income members and those in underserved communities. As regulators contemplate changes that will severely restrict access to these crucial services, we implore policymakers to preserve the ability of credit unions to continue offering overdraft protection and the non-sufficient funds services countless consumers rely on daily.