CFPB Turns Attention to Bank Overdraft Practices

CFPB

On February 22, the CFPB launched an inquiry into overdraft practices with a coordinated release of information. The official announcement came during a CFPB Roundtable discussion at Hunter College in New York City. At that event, CFPB Director Richard Cordray drew similarities between overdraft practices and payday lending, which was the subject of a prior CFPB field event. Mr. Cordray expressed his “concern[] that overdraft practices employed by some banks unnecessarily increase consumer costs by making it difficult to anticipate and avoid fees.” He also identified some practices the CFPB views as problematic, including those related to (i) ordering of transactions, (ii) missing or confusing information, and (iii) misleading marketing. To address those and other practices, the CFPB issued a request for information from consumers, third party processors, and financial institutions, regarding overdraft programs and their costs, benefits and risks to consumers. The CFPB also released and is seeking comment on a prototype “penalty fee box” that would appear on checking account statements to highlight overdraft activity and fees. Finally, the CFPB is collecting data from several large banks to inform a study of the effects of prior federal regulations and guidance regarding overdraft fees. While conducting these initiatives, Director Cordray promised to employ the CFPB’s supervisory and enforcement authorities to take action against financial institutions engaged in deceptive marketing related to overdrafts.