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Financial Services Law Insights and Observations

CFPB compares banks’ overdraft practices

Federal Issues CFPB Consumer Finance Overdraft Fees

Federal Issues

On February 10, the CFPB published a blog post providing research on banks’ overdraft fees, which highlighted the Bureau’s “ongoing and growing concern about the impact of bank overdraft fees on families.” The Bureau noted that in 2019, overdraft and non-sufficient fund fees (NSF) fees cost Americans approximately $15.5 billion, and though these fees decreased during the Covid-19 pandemic, “they’ve still cost people billions during this crisis—and were climbing through the third quarter of 2021.” According to the blog post, banks have been announcing changes to their overdraft programs, which include, among other things: (i) eliminating NSF fees charged when transactions bounce; (ii) decreasing overdraft fees; (iii) reducing the daily number of overdraft/NSF fees the bank can charge; (iv) providing or increasing the amount that an account can go negative prior to charging an overdraft fee; and (v) providing a grace period for bringing an account back to positive prior to charging an overdraft fee. The Bureau noted in an earlier blog post that “these changes represent an encouraging step by some banks in the right direction.” Additionally, the Bureau released a table giving a “snapshot” of large banks’ overdraft and NSF practices. The Bureau’s work on overdraft/NSF fees is part of a CFPB initiative, in which the Bureau says it “will strive to strengthen competition in consumer finance by using its authorities to reduce these kinds of junk fees.” The Bureau has issued a request for comment from the public on fees that are associated with consumers’ bank accounts, prepaid or credit card accounts, mortgages, loans, payment transfers, and other financial products, which the Bureau has characterized as being “exploitative” and not being subject to competitive processes that ensure fair pricing. Bureau research found that certain fees often hide a product’s true cost and can undermine a competitive market. (Covered by InfoBytes here). The comment period opened February 4 and closes on March 31.