Problems with Transaction Posting Orders in Meriwest Credit Union

Meriwest Credit Union

Let’s start with going over Meriwest Credit Union’s history. It began on May 5, 1961. A group of IBM employees organized the IBM San Jose Employees Federal Credit Union. The time went by and in 1975 the official name changes to Pacific IBM Employees Federal Credit Union. And sometime after that, in 1999 it became Meriwest Credit Union.

Meriwest Credit Union

Now the membership that was only available to IBM employees and their families is now available to anyone who lives or works in the Greater Bay Area of Northern California or in Tucson, Arizona. Meriwest Credit Union has 72,000 members and in excess $1.3 in total assets. Impressing, right?

You should know that Meriwest Credit Union offers standard overdraft protection and several advanced overdraft protection plans. But there is a little problem. The transaction posting order by the institution can affect how fees are assessed under these plans. The overdraft protection is called Courtesy Pay Overdraft Privilege. Moreover, Meriwest authorizes and pays overdrafts for checks and other transactions made with the customer’s checking account number and automatic bill payments.

Did you know that Courtesy Pay Overdraft Privilege overdraft protection will authorize or pay overdrafts for ATM transactions or everyday debit card transactions only under one condition? The customer needs to contract Meriwest’s operational support and explicitly authorize the credit union to do so.

Transaction posting

The transaction posting order influences overdraft fees. Every time the credit union covers an overdraft Meriwest charges a $35 overdraft fee. Interestingly, overdraft fees at Meriwest have no limit to the number that you can assess in a day. And as you know, many other financial institutions set a limit. For example, a limit could be two overdraft fees per day.

Generally, consumers view the excessive overdraft fees as an adversity. However, some financial institutions view this as a way to diversify their sources of revenue. Therefore, as interest rates remained low for many years, banks and credit unions felt a pressure to find new sources of income.

For this reason, a report by The Pew Charitable Trusts states that “Income from fees for services has grown considerably over time. In 1984, fee revenue was small in comparison with income earned from interest. By 2015, this gap had narrowed substantially.”

Moving on, financial institutions were accused of manipulating the transaction posting order of debits and credits in order to maximize the number of overdraft fees they can collect.

Let’s go over an example. You have $100 in your account. Then you make purchases of $20, $35 and $95 in that order. Next, the result is that the transactions post in that same order and only one overdraft charge occurs for the $95 purchase. But, what if Meriwest processes them in reverse order of $95, $35 and $20? You would incur two overdraft charges. The transaction posting order has a say in what kinds of overdraft charges you will get: greater or fewer.

What others think

The Consumer Financial Protection Bureau (CFPB) reports something accurate. “Of all the ways a transaction can be made, debit cards hold the lowest median value, $24, of financial transactions that lead to overdrafts. The median overdraft fee was $34. If overdraft protection for that transaction were thought of as a loan, the CFPB says, “such a loan would carry a 17,000 percent annual percentage rate.”

A national survey shared by the Pew Charitable Trust showed something interesting. 87% of consumers who experience overdraft fees are somewhat or very concerned about the price they pay for overdraft service. And it is natural. Afterward, most people would prefer to have a transaction declined than incur a $35 fee. This is true especially when the fee is a greater price than the price of the original transaction.

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