CFPB moves to scrutinize banks’ overdraft programs

As part of a pilot supervision effort, the CFPB has requested information on overdraft and non-sufficient funds practices from “over 20 institutions” that it has identified as having a higher share of frequent overdraft users or higher average fees. The bureau signaled in a blog post today it intends to “use this information for further examination and review” and to “share this information with other regulators,” but not make the information public.

Specifically, the CFPB is asking the institutions to provide data on: the total annual dollar amount consumers receive in overdraft coverage compared to the amount of fees charged; the annual dollar amount of overdraft fees charged per active checking account; the annual amount of NSF fees charged per active checking account; the prevalence of frequent users of overdraft; and the share of active checking accounts that are opted into overdraft programs for ATM and one-time debit transactions.

This marks the latest effort by the bureau under Director Rohit Chopra’s leadership to target legitimate bank overdraft programs, which are already subject to robust disclosure and regulatory requirements. In an op-ed published this past April, American Bankers Association President and CEO Rob Nichols strongly condemned the bureau’s efforts to attack overdraft offerings and other fee-based bank products and services. In addition, recent ABA/Morning Consult research found that consumers want access to overdraft, with 89% saying they find their bank’s overdraft protection valuable, and three in four who have paid an overdraft fee in the past year saying that, they were glad their bank covered the payment rather than returning or declining it.