CFPB Report Questions Overdraft Practices

CFPB Overdraft

On June 11, the CFPB released a white paper with initial findings from its study of bank and credit union overdraft practices. The paper reports that (i) customers who opt-in to overdraft programs pay higher fees and are more likely to have their accounts involuntarily closed, (ii) overdraft practices and costs / closures related to overdraft programs vary widely by institution, and (iii) some policies and practices are not disclosed or are disclosed in a technical manner. The CFPB highlights bank revenue generated by overdraft fees, stating that such fees represent approximately 60 percent of the fee revenue generated by consumer checking accounts, and identifies specific practices the CFPB believes raise questions about whether customers can anticipate or compare the cost of overdrafting, including funds availability and order posting practices. The report is based on a review of institution-level data, and the CFPB plans to review account-level data in order to better understand how differences in bank practices affect customers.