Metvante Bill Paying Fuels Credit Union Fee Income; Members Paying Through the Nose

We recently came across a situation where an individual received a check from Metavante, a credit union’s bill paying service, on which payment had been stopped. The individual receiving the check routinely deposited it in his credit union. A few days later he received a notice that payment had been stopped and he was being assessed a $10 fee as a result. The problem is there was insufficient funds in the members account at the issuing credit union on the date the check was issued.

Now, the big question is “Why did the credit union or Metavante even issue a check knowing there was insufficient funds in the account?” This puts the CU and Metavante in a very negative light especially with the person receiving the check. Should this person “trust” future checks from Metavante?

Every person we put this question to has expressed surprise . . . and shock in some cases.

A chat with the Credit Union official says that’s how the Metavante program works and that it worked well. Metavante says “no comment.”

We think we have a finger pointing situation here on a poorly designed service whether it’s the Credit Union’s fault or Metavante. When the check bounced the first time, a fee of $25 was assessed. Metavante processed the bad check a second time resulting in a second fee of $25. It’s interesting to note that when the Metavante check was presented for payment, there were sufficient funds in the member’s account to clear the check.

So here we are. Metavante says it’s the credit union’s policy. The Credit Union says “that’s the way the program works.” The member is out $50 bucks. The bill paying recipient is out $10.

Industry consultants say 10% to 20% of households generate the bulk of overdraft income. The households hit hardest by overdrafts pay an average of $1,374 a year in fees, estimates G. Michael Flores, founder of Bretton Woods, a management advisory firm that works with financial institutions.

If consumers overdraw on a $20 debit card or bill paying transaction, are charged the median fee of $27 and repay the credit in two weeks, they're effectively paying a 3,520% APR, according to the Federal Deposit Insurance Corp.

Robin Rutan, of Glenwood Springs, Colo., says her local credit union pays transactions that overdraw her account by a few cents, without her permission, and charges her $27.

Here is what some firefighter credit unions do.

Charlotte Fire Department Credit Union uses IPay. They receive a file from IPay for posting. If an account does not have sufficient funds, the credit union has an option to post or not post the transaction and determines if a fee should be assessed . . . but no check is issued if funds are not available.

Houston Firefighters Fed. Credit Union says if a member does not have the funds to cover the check, they do not pay it. They also do not charge a fee. If the member signs up for e-mail notification, we will e-mail them that we did not pay the bill. We will try again for the next two of days and then stop.

San Francisco Fire Credit Union says,”If a member has scheduled a payment and there are no funds in the account we do one of two things: 1) We offer courtesy pay up to $750 so if the bill does not take them over that limit, we will issue the payment (97% of all online bill payments are process electronically so no checks are cut) and charge the member a fee.

2) If they either opted out of courtesy pay or are over the limit for courtesy pay we will retry for 3 days and post a message in home banking letting the member know we can’t process the payment – no fee.”

San Diego Firefighters Fed. Credit Union uses IPay. The Credit Union will pay the bill so long as the member has direct deposit and charge them a courtesy pay fee of $22. This is only good for bills up to $1,500. If the bills total over $1,500, they will not pay but return to IPAY. They will then notify the member via e-mail that the bill was not paid due to insufficient funds.

What does your Credit Union do? Share with us who your bill payment processor is. Do they issue checks and then stop payment on them? What is your policy regarding fees and insufficient funds? Send to billrogers@swbell.net. Also, note that Metavante is now part of FIS.