Reducing Fees, Reducing Losses

Today I wanted to catch you all up on a few changes to our fees, and explain some of the restrictions we have placed on check deposits.

Easiest ones first: we eliminated the 1% fee to make your loan payments via debit card, and the $40 annual credit card fee is gone. Yay!  If the annual credit card fee stopped you from applying for our Elevate credit card, now is the time to take advantage!

More complicated are the changes in NSF fees.  A ‘non-sufficient funds’ charge of $25 used to occur when a member wrote a check to another person or paid a bill, yet did not have enough funds in their account to cover this expense.  Similarly, if a member deposited a check that then bounced, we charged $25. The fee was always lower than bank NSF fees which could be $40 but it wasn’t ever zero.  Whether payment requests going out or checks coming in, if there isn’t any actual money behind these, credit union staff bear a cost.  We manually double-check each rejection of a check or rejection of a payment request, and we also allow members a small window of time when they may deposit funds to their Bk Coop account so that we don’t have to reject a payment request. Plus I believe an NSF fee does cause a person to think twice about writing a check or paying a bill without knowing whether there is money to back those payments.

Its true that, over the past 6 months, some banks eliminated all NSF fees. We felt pressure to match that feature, but decided we did not want to risk a surge in bad payment advices. Seriously, double-checking these exceptions can take hours. Instead, we dropped the fee to $15 for the first 3 bounced payments. After the first 3, the fee goes back to $25.

Also, note that these are not the ‘junk fees’ targeted by the CFPB. The CFPB wants to eliminate bank fees on instant NSFs, like when your debit card is declined, and on overdraft fees when the bank pays your overdraft and charges both a fee and interest on the overdraft.  Bk Coop does not charge for debit card declines and we do not pay overdrafts. 

The restrictions on check deposits — and the gigantic check losses that forced us into those — are deeply regrettable. Brooklyn Coop has been experiencing a real uptick in the presentation of fraudulent checks by its members. Since last November, we have seen over $800,000 in fake checks and money orders deposited here.  Some were new members, likely opening the account for illegal purposes. Others seemed like innocent bystanders, deposting checks that other people told them were genuine but were actually altered. We caught the vast majority of these bad checks and have closed out those accounts. Inevitably, some were not caught and Bk Coop is facing almost $40,000 in losses for this year so far. By contrast, annual check losses historically are less than $10,000.

It isn’t just us — see this Alert.  The new thing seems to be advances in counterfeiting US Treasury checks. This is a lucrative business due to the literal impossibility of the US Treasury being able to flag counterfeit checks in a timely manner. The credit union can be liable for a fake Treasury check (or a USPS money order) for over a year after it was deposited. This means that all our risk measures need to be focused at the moment of deposit because, once we accept that check, we won’t know if it is true or false until months later.

We came up with these restrictions in order to prevent bad actors from getting through while hopefully not inconveniencing sincere members from transacting. Once the fraud dies down, we can scale back the restrictions. Until then, however, these steps are necessary to safeguard our members’ money.