What’s a “junk fee”? Simply put, it’s any charge beyond what you’ve agreed or expected to pay for a product or service. For a credit card, it can be a late fee. For debit, an overdraft or NSF fee. For a hotel, a “resort fee” slapped on the bill when you check out.
I didn’t come up with the phrase. That goes to the CFPB, or Senator Elizabeth Warren. Or a nameless intern with a knack for catchy terms.
Either way, it’s in the national discussion. The CFPB has an entire section dedicated to Junk Fees across a range of industries. They have things to say about overdraft fees, no doubt. I mean, we do agree on that.
NAFCU took a different position, claiming that the current arrangement is fine and to let credit unions handle it. They’ll come up with the best strategy for their members and institution, as their press release explains.
So that’s one big topic. And the CFPB isn’t stopping at overdraft.
In early February 2023, they issued new guidance for credit card late fee structures. Naturally, the credit union industry had harsh words in response.
On a totally different topic, a certain conversational AI stole the spotlight, reaching 100 million users faster than any platform ever. ChatGPT single-handedly broke education, thought-leadership, and programming…or so the headlines would have you believe.
While it’s an amazing system, it’s also not going to steal everyone’s job, yet. However, it does open up an opportunity to have conversations which let us see different perspectives and expand our own critical thinking.
So as if I were assembling my first lightsaber, I elegantly smooshed (the Jedi term) these topics together.
Below is an unedited discussion on the “junk fees” topic between myself and ChatGPT, taking the role of a credit union executive and lobbyist who isn’t quite so keen on simply eliminating them.
Geek notes: You may notice it totally missed my point about CDFI (maybe I shouldn’t have written it out), but I do believe this is a direction worth pursuing. Reading through, I realize I should have asked for examples. Oh well, next time.
I was also surprised how it eventually started getting “persuaded” to my position, agreeing that junk fees should go, but not on how. I wonder…is this how a person may think, too?
Finally, I asked it to summarize it up in a way a geek would love. Here’s the gem we got:
“Together we can boldly go where no credit union has gone before, providing affordable and accessible financial services.”
ChatGPT
Image credits: DALL-E 2 AI image generator
Eliminating Junk Fees: A Human/AI Discussion
Joe
The concept of “junk fees” is in financial news regularly now. With the CFPB leading the charge against a range of punitive fee structures, it’s a matter of time before new rules go in place.
Even the President is in support of eliminating junk fees, as he posts about it often. As a member of the credit union community, I agree with this stance. The poorest members shouldn’t be the ones most impacted by the highest fees on a range of banking services.
Income can still be generated through value, rather than off those getting stuck with late payments and other charges.
Knowing my stance, take the position as a lifelong credit union executive and lobbyist who is against these policies.
They have a range of good arguments why these ideas are not beneficial for small credit unions, their members, or the industry as a whole (I don’t know what they are). With you roleplaying as that executive, let us engage in a reasoned discussion on the topic.
You go first and I will respond.
ChatGPT
As a credit union executive and lobbyist, I strongly believe that the concept of junk fees and the push to eliminate them is misguided and harmful to the credit union industry.
Small credit unions, in particular, rely on these fees as a source of revenue. Without them, we will have to resort to other measures to generate income, such as increasing interest rates, decreasing services, and even closing down branches. This will have a negative impact on our members, who will have fewer options and face higher costs.
Moreover, these junk fees are not inherently bad. They serve as a deterrent for late payments and other harmful financial practices. Without these fees, we risk encouraging irresponsible behavior that will harm both the credit union and its members.
Additionally, the proposed regulations are too broad and will harm the entire credit union industry. They will stifle innovation and growth, limit our ability to adapt to changing market conditions, and increase compliance costs.
In conclusion, the push to eliminate junk fees is misguided and harmful to the credit union industry and its members. We must resist this push and fight for a regulatory framework that allows us to continue serving our members effectively and efficiently.
Joe
I appreciate your position on the issue. On the point of small credit unions needing this fee revenue, I agree that we must find ways to help them remain viable in an ever more challenging financial world. And making sure they can continue to serve their members, often people with few or no other traditional banking options, is essential.
However, why are we immediately saying no to something which can help people, rather than using it as an opportunity to seek out new forms of revenue, enhancing how the credit union model works for their members and community?
This can be a springboard for innovation, not a new “write to your representative and say no” issue. I also agree that some fees make sense to discourage irresponsible financial behavior.
However, a number of large banks and even other credit unions have taken a no-fee approach, with negligible change in member practices.
Instead of using a stick, let’s devise a carrot to incentivize and empower healthier financial practices.
Then, we’re educating as well as assisting.
Whenever regulations are proposed, a standard refrain is that they are too broad and will stifle growth. To the contrary, such rules would only put limits on what isn’t allowed, not telling anyone you cannot innovate.
In fact, this should be taken as a golden ticket to put our thinking caps on and innovate our way out of the challenges faced. We can watch as new rules are implemented and confidently tell members and non-members, “credit unions don’t believe in such junk fees, and we work every day to help build our members and communities.
Financial wellness is at the core of our being, so while we may not always agree on the regulatory path, we will always be at the front of innovation for finding ways to provide banking opportunities to every American.
ChatGPT
I understand your perspective and I agree that seeking out new forms of revenue and enhancing the credit union model is important. However, the reality is that change doesn’t happen overnight, and the sudden elimination of junk fees could be devastating for some credit unions.
We need to be proactive in finding new sources of income, but it’s not something that can be done overnight without causing harm.
I also agree that we should focus on financial wellness and education for our members, and I commend the idea of incentivizing healthy financial practices. However, this needs to be done in a way that is sustainable for the credit union and its members, without relying on junk fees.
With regards to regulations, I do believe that too many regulations can stifle growth, especially for small credit unions that don’t have the resources to comply with them. The key is to find a balance between protecting consumers and allowing credit unions to serve their members effectively.
Ultimately, I believe that credit unions should strive to provide affordable and accessible financial services to their members. Junk fees may not be the ideal solution, but they are a reality for many credit unions, and eliminating them without a comprehensive plan for sustainability could have negative consequences.
We need to work together to find a better way to serve our members and communities while remaining financially viable.
Joe
Change does not happen overnight, which means we can find a compromise on the rule making as well. How would you feel about rules that take effect over a period of time, giving credit unions, especially smaller ones, opportunity to find those new sources of income?
We can also take a look at the Community Development Financial Institution program to see how it can play a role in assisting the transition for more highly affected credit unions.
In the meantime, members can benefit from reduced costs. This can also be supported by education campaigns for members to help them best understand how to avoid or reduce fees incurred.
At the same time, making fee structures clear can reduce expenses in collection and placement of them in the credit union. Financial wellness is a valuable part of the efforts, as we discussed and agreed upon.
However, you cannot educate everyone out of challenging financial situations.
Thus, we should look to larger social issues and ensure that credit unions have a leading role in helping address the impacts of socioeconomic pressures on affected populations.
Yes, we must find the balance for regulations to be effective in their goal and also not negatively impact credit unions. I believe we can do this while making sure credit unions are shining examples of affordable and accessible financial services.
Junk fees don’t have to be part of that future, even if it takes some time to get there.
ChatGPT
I absolutely agree with you on the importance of finding a compromise on the rule making, especially one that takes effect over time.
This would give credit unions, especially the smaller ones, an opportunity to adjust and find new sources of income. The Community Development Financial Institution program is definitely worth exploring as well.
In addition, the education campaigns are essential to help members better understand the fee structures and how to avoid or reduce fees incurred. Making fee structures clear can also reduce expenses in collection and placement of them in the credit union.
I also agree that credit unions should have a leading role in addressing the impacts of socioeconomic pressures on affected populations. Providing financial wellness and education to our members is important, but we must also recognize that many are facing larger social issues that impact their financial stability.
Overall, I believe that with cooperation and collaboration, we can find a balance between regulations that are effective in their goal and do not negatively impact credit unions.
Our goal should be to continue providing affordable and accessible financial services to all members, without relying on junk fees. We can work together to build a better future for credit unions and their members.
Joe
It appears we have more to agree about than disagree! I hope we can work together to deliver on the mission of “people helping people”, building financial wellness and empowerment for millions. While still ensuring credit unions can keep the lights on.
Thank you for engaging in this discussion.
ChatGPT
I completely agree. It’s always great to have a productive and respectful discussion, especially on an issue as important as this. I believe that by working together, we can deliver on the mission of “people helping people” and build a better future for credit unions and their members.
Thank you for taking the time to discuss this issue with me. Let’s keep this dialogue going and continue to work towards a solution that benefits everyone.
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