ABA to CFPB: No Evidence to Support Additional Regulatory Activity Related to Overdraft

In a comment letter to the Consumer Financial Protection Bureau today, the American Bankers Association opposed a proposal by the bureau to survey consumers on their understanding of four prototype overdraft disclosure forms that it released in August 2017. Following the end of this comment period, the CFPB must decide whether to submit the survey proposal to the Office of Management and Budget for approval as required under the Paperwork Reduction Act or to withdraw the submission. The bureau’s fall 2017 regulatory agenda stated that overdraft remains in the “pre-rule stage” five years after the bureau initiated its review.

ABA noted that it is premature for the CFPB to test the prototype disclosure forms without any evidence that bank customers lack information under the existing Model Form A-9 to make informed choices regarding use of overdraft services.  “In the absence of a finding that customers are unable to make informed choices regarding overdraft under the Model Form, we do not believe that it is necessary — or fiscally responsible — for the bureau to spend additional taxpayer funds testing potential alternatives to that form,” ABA wrote.

The association added that the survey does not ask essential questions on why customers use overdraft, whether they have ever opted out of overdraft and what other options they have to address short-term liquidity needs if access to overdraft were restricted. In addition, the survey does not ensure that frequent users of overdraft — the individuals who know the product best — will be included in the pool of respondents.  ABA has urged the CFPB to address these questions and study the practices of frequent users since the bureau initiated its review of overdraft practices in 2012. For more information, contact ABA’s Jonathan Thessin.