A Quieter Year for Overdraft Oversight
By Cheryl Lawson, EVP of Compliance Review, ADVANTAGE
After several years of intense regulatory activity, we all welcomed the quieter landscape that emerged in 2025. The repeal of the CFPB’s overdraft rule, reduced staffing at the agency, and a slowdown in enforcement actions created a bit of breathing room across the industry. Yet even with the volume turned down, the pressure hasn’t disappeared. Recent signals indicate that overdraft strategy remains an area where credit unions must stay proactive.
A Breather, Not a Break From Oversight
Even with a softer federal backdrop, examiners continue to pay close attention to overdraft practices, especially around Reg E opt-in processes, fee amounts, and communication clarity. Political scrutiny has also resurfaced with a group of U.S. senators issuing letters to large credit unions questioning their overdraft practices. Litigation activity is quieter, but certainly not gone. All it takes is a renewed lawsuit trend or a shift in political priorities to bring overdraft programs back into the spotlight.
A quieter year doesn’t mean fewer risks. It simply changes the type of risks credit unions need to pay attention to.
Use the Calm to Clarify Your Direction
Periods of reduced regulatory noise offer something credit unions rarely get: room to be proactive instead of reactive. Many institutions pressed pause during the peak years of regulatory and political scrutiny, focusing more on defensive positioning than strategic improvement. But with the volume dialed down, credit union leaders now have the opportunity to step back and ask:
- Does our current overdraft approach reflect our values and consumer focus?
- Are we confident in our opt-in, disclosure, and fee practices?
- Are we prepared if scrutiny resurges, or if examiners dive deeper in 2026?
- Could a few targeted updates strengthen both compliance and member trust?
These questions matter more than ever, especially as consumer financial fragility increases and the demand for safe, reliable liquidity tools grows.
Balancing Risk, Revenue, and Reputation in 2026
Credit unions continue to walk a fine line between providing meaningful financial support and maintaining essential non-interest income. When managed responsibly, overdraft services remain a critical safety net, providing short-term liquidity at a time when many households have few alternatives.
The challenge is balancing examiner expectations, transparency, and member needs while protecting the reputation and financial stability of the institution.
Putting It in Perspective
A quieter regulatory year offers credit unions a rare opportunity to step back and evaluate where their overdraft programs stand. Whether the focus is on tightening compliance, improving communication, or better supporting members who rely on short-term liquidity, now is an ideal time to pause, reassess, and plan with intention for 2026.
If your credit union is reassessing its approach, the ADVANTAGE team is always available to talk through questions or provide a fresh perspective on your program.
Connect with ADVANTAGE to learn more.
