CFPB Will Look at Overdraft Policies (Misc News: February 23, 2012)
The U.S. Consumer Financial Protection Bureau is starting an inquiry into bank checking account overdraft policies, according to the bureau’s director Richard Cordray.
“With today’s technologies, consumers have more opportunities to access their checking accounts and cause overdrafts,” Cordray said in a press release. “But overdraft practices have the capacity to inflict serious economic harm on the people who can least afford it.”
Banks and credit unions were set to charge customers about $38 billion from overdraft fees in 2011, according to a Sept. 15 estimate by Moebs Services, a Lake Bluff, Ill.-based economic research firm, Bloomberg Businessweek reported.
The bureau plans to request data from financial institutions, and input from the public on how the ordering of transactions affect how much consumers pay, the agency said in the statement. Some financial institutions have debited customers’ accounts not in the order of the transactions, but with the highest amount first, so as to overdraw the account as quickly as possible, and incur fees and interest, the bureau said.
The agency will also examine the quality of information consumers receive on overdraft programs, bank marketing campaigns on overdrafts, and how young and low-income people are affected by overdrafts.
Finally, the bureau is seeking feedback on a sample “penalty fee box” that could appear on checking account statements and state what fees consumers pay.
Other regulators have imposed various rules that have limited the application of overdraft programs. In 2009, the Federal Reserve required that consumers affirmatively opt into programs, and in 2010 the FDIC forced banks it regulates to steer heavy users of overdrafts into cheaper forms of credit, a move that drew strong opposition from community banks.
The average overdraft fee ranged from $30 to $35 in 2011 and has increased by 17 percent over the past five years, according to the consumer bureau. A 2008 study by the FDIC found that consumers who overdrew their accounts 20 or more times annually paid an average of $1,610 in fees.