On June 11, the Consumer Financial Protection Bureau (CFPB) issued two press releases related to overdraft programs. The first press release includes the CFPB’s report on bank and credit union overdraft practices that raise concerns regarding whether the overdraft costs on consumer checking accounts can be anticipated and avoided. According to the CFPB, the report is intended to provide the factual basis to develop more uniform treatment of the issues identified across financial institutions. The report is based on data from large banks supervised by the CFPB and supplemented with information from the CFPB’s request issued to the public in February of last year. The report can be found here.
The second press release was CFPB Director Richard Cordray’s prepared remarks. Cordray stated that there are three major takeaways in the published report which may foreshadow some potential revisions to regulation in this area. The first takeaway was that the data indicated that opting in to overdraft coverage of ATM and debit card transactions makes consumers more vulnerable to increased costs and involuntary account closures. The second takeaway that Cordray identified was that financial institutions have very different policies, procedures and practices that can be difficult for consumers to understand and affect how often they will incur overdraft fees. The last takeaway was how widely the outcomes for consumers vary across financial institutions related to their overdraft charges.
Although Cordray did indicate in his release that nothing in the report implied that banks and credit unions should be precluded from offering overdraft coverage, the industry should likely anticipate proposed changes to regulations impacting overdraft programs.