Since the CFPB was launched, we have been predicting that overdraft fees would be among the CFPB’s priority items. With the CFPB’s announcement today that it has launched an inquiry into checking account overdraft programs, it’s clear our predictions were correct. The CFPB’s focus on overdraft fees is proceeding on several different fronts and we will share more detailed comments on the CFPB’s initiatives in further blog posts.
First, the CFPB has sent a “data request” to a number of banks seeking information about their overdraft practices.
Second, the CFPB will be publishing in the Federal Register a notice and request for information in which it “encourages comments from the public, including consumers, overdraft program processors, and financial institutions.” According to the CFPB, the information it seeks is focused on four main areas: (1) transaction re-ordering that increases consumer costs, (2) missing or confusing information that interferes with a consumer’s ability to anticipate and avoid overdraft fees, (3) misleading marketing materials, and (4) the disproportionate impact of overdraft programs on low-income and young consumers.
Third, the CFPB has issued a prototype “penalty fee box” that would appear on checking account statements and include the total amount paid in overdraft and non-sufficient funds fees during the statement period and the total amount overdrawn during the same period. The prototype includes other information for the statement period such as the number of times the customer overdrew the account and the number of days the customer was overdrawn. It also gives the customer “ways to lower these fees.”
Fourth, the CFPB issued a consumer advisory that describes options for avoiding overdraft fees.
Director Cordray announced the CFPB’s overdraft initiatives today at a press conference in New York City. The press conference is to be followed by a town hall where, according to the CFPB, “members of the community will share their experiences with checking accounts.”