In the last two weeks, both the CFPB and OCC have been critical of bank overdraft practices and the CFPB has warned of enhanced supervisory and enforcement scrutiny.  The potential costly impact that such increased scrutiny could have on private litigation is demonstrated by the recent proposed settlement in Lowe v.Continue Reading

In remarks last week to the Consumer Federation of America’s 34th Annual Financial Services Conference, Acting Comptroller of the Currency Michael Hsu took banks to task for contributing to income and wealth inequality through overdraft programs by earning $15.5 billion in overdraft fees in 2019 that “are being paid by those customers who are the most financially vulnerable.” … Continue Reading

CFPB Director Chopra used the release of two new reports about bank overdraft practices to warn banks—and responsible executives—that they could be at risk if the banks engage in overdraft practices deemed to violate Dodd-Frank’s “UDAAP” prohibition.  Prior to the issuance of the two new reports, the Bureau’s most recent report on overdrafts was issued in August 2017 under the leadership of former Director Cordray. … Continue Reading

The Division of Banks of the Massachusetts Office of Consumer Affairs and Business Regulation has issued a supervisory alert to warn financial institutions of the potential legal and regulatory risks arising from NSF fees charged on the representment of unpaid transactions.

The alert addresses the common scenario in which a financial institution charges an NSF fee when an ACH item is presented for payment from a consumer’s account and is declined due to insufficient funds in the account to cover the item. … Continue Reading

Despite having been a target for over a decade, bank overdraft practices still remain a focus of regulators and plaintiffs’ class action attorneys.  We discuss federal and state legislative, regulatory, and enforcement developments; theories currently used by plaintiffs’ attorneys to challenge overdraft practices, including retry payment claims; litigation involving alleged Regulation E violations; and the use of arbitration provisions to help avoid class action exposure.… Continue Reading

Mr. Hunt shares his perspective on a range of issues, including how Rohit Chopra, CFPB Director-nominee, is likely to approach his new role, the CFPB’s likely approach to innovation and overdraft rulemaking under Mr. Chopra’s leadership, how banks are engaging with data aggregators, the OCC’s role and expectations for a new Comptroller, the status of Community Reinvestment Act rulemaking, and the potential for legislative changes.… Continue Reading

An article recently published by the Brookings Institution as an op-ed entitled “A few small banks have become overdraft giants” serves as a warning that bank overdraft practices are likely to face increased attention from the “new CFPB.”

Authored by Aaron Klein, a Brookings Senior Fellow, the article reports that overdraft revenues accounted for more than half of the net income of six small banks in 2020 and criticizes regulators for “tolerat[ing] banks that are mostly or entirely dependent on overdraft fees for profitability.” … Continue Reading

24 state attorneys general, the D.C. attorney general, and the Executive Director of the Hawaii Office of Consumer Protection have sent a joint comment letter to the CFPB urging it not to make any changes to the Regulation E rule that limits the ability of financial institutions to charge overdraft fees for paying ATM and one-time debit card transactions that overdraw a consumer’s account (Overdraft Rule). … Continue Reading

The CFPB has published a notice in the Federal Register announcing that it plans to seek OMB approval to conduct online testing of ATM/overdraft disclosures with 8,000 individuals.  Comments are due on or before January 16, 2018.

According to the notice, the testing “will explore consumer comprehension and decision-making in response to overdraft disclosure forms. … Continue Reading