The CFPB released a report on the findings of its first major study on overdraft programs drawing principally on institution-level information from banks that participated in the study, responses to its request for information (see March 6, 2012 Alert), and other industry sources. According to Director Richard Cordray, the report had three major takeaways: (1) the data shows opting into overdraft coverage of ATM and debit card transactions make consumers more vulnerable to increased costs and involuntary account closures; (2) financial institutions have varying overdraft policies, procedures and practices, which make it difficult for consumers to understand whether and how often they will incur overdraft fees; and (3) the outcomes for consumers vary widely across financial institutions (e.g., amount of overdraft fees and involuntary account closures). Of import, Director Cordray noted that “nothing in the report implies that banks and credit unions should be precluded from offering overdraft coverage.” Of its many findings, the CFPB concluded that the FRB’s “opt-in” amendments to Regulation E have made a “material difference” in consumer experience with overdraft programs. The CFPB also released a factsheet on the overdraft practices of consumers.
Alert June 11, 2013