Skip to content

Menu

Ballard Spahr L.L.P. logo
HomeKey TopicsSub-MenuRegulatory and EnforcementLitigation and Court Decisions

Consumer Finance Monitor

CFPB, Federal Agencies, State Agencies, and Attorneys General

Home » Pew continues call for checking account arbitration ban and overdraft limits

Pew continues call for checking account arbitration ban and overdraft limits

By Barbara S. Mishkin on May 18, 2015
Posted in Arbitration, Deposit Accounts, Overdrafts, Regulatory and Enforcement

In its latest report evaluating the checking account practices of the nation’s largest banks, the Pew Charitable Trusts continues to press the CFPB to write new overdraft and other rules for checking accounts.

Pew’s new report, the third report in a series, examines the practices of 45 of the nation’s 50 largest banks by deposit volume and assesses trends among the 32 banks that have been reviewed in all three studies.  (In the prior reports, which were released in 2013 and 2014, Pew evaluated, respectively, 36 and 44 of the 50 largest banks.)

Despite finding significant improvement in disclosure practices (with more banks using Pew’s “best practice summary disclosure box”), Pew states that “policymakers cannot simply wait for all financial institutions to adopt comprehensive practices which ensure that checking accounts are safe and transparent.”  Pew wants the CFPB to write new rules “that require financial institutions to clearly disclose important account terms and conditions.”

The report shows an increase in the number of banks among the 32 banks reviewed in all three studies that do not have a binding arbitration provision in their checking account agreements.  Nevertheless, Pew renews its recommendation that such provisions be eliminated from checking account agreements.

Pew’s finding that fewer banks had arbitration provisions in their checking account agreements is consistent with data in the CFPB’s March 2015 Study of consumer arbitration showing that only 7.7% of banks with 44% of insured deposits use arbitration clauses.  This means that 92.3 of banks with 56% of deposits do not use arbitration.  That data strongly undercuts Pew’s renewed recommendation that arbitration clauses be eliminated from deposit account agreements, since there is obviously abundant competition in the marketplace to accommodate checking account customers who prefer not to have an arbitration agreement.  The CFPB’s data also undercuts the agency’s own conclusion that arbitration is a barrier to class actions.  In addition, Pew’s recommendation is actually detrimental to consumers, since the data in CFPB’s Study conclusively demonstrates that  arbitration is faster, cheaper and more beneficial for consumers than litigation, including class action litigation.

As it has done in previous reports, Pew seeks restrictions on overdraft fees without making any findings about the reasonableness of the amount of the overdraft fees charged by the banks it evaluated.  Pew wants the CFPB to require overdraft fees to be reasonable and proportional to a financial institution’s costs in providing an “overdraft loan.”  It also continues to push the CFPB for a rule that requires banks to post deposits and withdrawals “in a fully disclosed, objective, and neutral manner, such as in chronological order, which does not maximize overdraft fees.”

Although the CFPB has not yet made overdraft rulemaking a front burner issue, continuing pressure from Pew and other consumer groups for the CFPB to move forward with rulemaking could cause the CFPB to accelerate its rulemaking timetable.

 

Tags: aribtration, CFPB, checking account, overdraft, pew
Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Related Posts
FDIC Proposes Revisions to Brokered Deposits Rule
August 1, 2024
Minnesota federal court dismisses lawsuit against FDIC over NSF fee guidance
April 9, 2024
Ballard Spahr to hold March 5 webinar on proposed rules on overdraft and NSF fees
February 12, 2024

Subscribe to the blog to receive daily notifications when new posts are published.

Regulatory & Enforcement
Litigation & Court Decisions

Subscribe to the Consumer Finance Monitor Podcast

listen on apple podcasts
Listen on YouTube Music
listen on spotify
CA Consumer Financial Protection Law Resource Center

Stay Connected

RSS LinkedIn Twitter YouTube
2024 Chambers Ranking
Top Ranked Chambers USA 2022

Topics

Archives

Resources

  • American Bankers Association (ABA)
  • American Financial Services Association
  • CA AG
  • CA Department of Financial Protection and Innovation
  • CBA
  • CFPB
  • Conference of State Bank Supervisors (CSBS)
  • Democratic Attorneys General Association (DAGA)
  • Dodd-Frank Act Title X
  • Dodd-Frank Act Title XIV
  • DOJ
  • FCC
  • FDIC
  • Federal Reserve Bank
  • Financial Services Roundtable (FSR)
  • FTC
  • HUD
  • IL AG
  • MA AG
  • MBA
  • National Association of Attorneys General (NAAG)
  • Nationwide Mortgage Licensing System (NMLS)
  • NCUA
  • NY AG
  • NY DFS
  • OCC
  • U.S. Department of the Treasury

Related Blogs

  • American Banker BankThink
  • American Bankers Association Dodd-Frank Tracker for CFPB
  • Bankwatch
  • Consumer Law & Policy
  • Credit Slips
CFS Alerts
CFS Events

Recent Posts

  • Federal Judge vacates CFPB medical debt rule
  • Join Our Webinar on the Supreme Court’s Recent Landmark Ruling on Universal Injunctions
  • Jonathan Gould confirmed as Comptroller of the Currency
  • Unlocking New and Exciting Fintech Opportunities: Join Our Webinar on August 12, 2025
  • Federal Court issues order granting universal injunction to a provisionally certified class in new birthright citizenship lawsuit

Consumer Finance Monitor

by the Consumer Financial Services Group at Ballard Spahr LLP

RSS LinkedIn Twitter YouTube

Practice Leaders

Daniel JT McKenna
mckennad@ballardspahr.com
215.864.8321
John D. Socknat
socknatj@ballardspahr.com
202.661.2253
DisclaimerPrivacy Policy

ABOUT THE CFS GROUP

The Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance, including pioneering work in pre-dispute arbitration programs. Read More
Copyright © 2025, Ballard Spahr L.L.P. All Rights Reserved.
www.ballardspahr.com
Law blog design & platform by LexBlog LexBlog Logo