CFPB survey examines consumers’ ability to pay overdraft, NSF fees

Most households that are frequently charged overdraft or non-sufficient fees report having difficulty paying the fees, although that figure drops significantly among households that are only occasionally charged fees, which is the vast majority of consumers, according to a survey released today by the Consumer Financial Protection Bureau.

The survey was released ahead of proposed rulemaking in which the CFPB is expected to argue that fees charged for overdraft services are finance charges, which would subject them to the requirements of Regulation Z, or the Truth in Lending Act. The move is part of a crackdown on so-called “junk fees” by the bureau and Biden administration. The American Bankers Association has opposed any suggestion that overdraft fees can or should be subject to Reg Z.

The CFPB’s survey found that in the past year, more than 81% of households that were frequently charged overdraft and NSF fees have had difficulty paying the fees at least once. That figure dropped to 55% among households that were occasionally charged fees in the past year, and was less than 25% among households that didn’t pay any fees during that time period. However, only about 15% of respondents said they were charged one to three fees in the past year, with less than 8% saying they were charged four or more times. More than 76% said they were not charged fees.

The CFPB survey also suggested that consumers use overdraft strategically to access needed liquidity. Among frequent users of overdraft—respondents who were charged at least four overdraft fees in the past year—most either thought it possible they would be charged a fee or expected it. Frequent users also struggled to pay their bills, turning to overdraft as a source of liquidity: 32% of this group had trouble paying their bills three to four times over the past year, and 36% of this group had trouble paying their bills five or more times over the past year.

ABA’s Nichols: CFPB statement distorts picture on overdraft fees

A CFPB statement accompanying the release of its survey on overdraft protection fees ignores the fact that the fees are clearly disclosed, highly regulated and provide a service that an overwhelming majority of consumers find valuable, ABA President and CEO Rob Nichols said. In a press release, the bureau claimed the survey showed that many Americans “are still being hit with unexpected overdraft and nonsufficient fund fees.” However, Nichols noted that the bureau’s research found that a significant number of banks no longer charge overdraft and NSF fees, and that three out of four consumers surveyed didn’t pay any overdraft or NSF fees in the last year.

“A more comprehensive survey would have asked consumers if they appreciate their bank’s overdraft protection,” Nichols said. “A recent Morning Consult survey conducted for ABA shows exactly that. For the fourth year in a row, nine in 10 consumers (88%) found their bank’s overdraft protection valuable, and nearly eight in 10 consumers (77%) who paid an overdraft fee in the past year were glad their bank covered their overdraft payment, rather than returning or declining payment. Sixty-three percent of consumers think it’s reasonable for banks to charge a fee for an overdraft, as opposed to only 24% who think it’s unreasonable. Next time we hope the CFPB recognizes the value Americans say they receive from overdraft programs rather than demonizing a financial product consumers clearly appreciate.”