CFPB to Probe Overdraft Practices Posted by AVCU on 10:27 AM

As reported by American Banker, on Wednesday the Consumer Financial Protection Bureau (CFPB) announced that it will target financial institution overdraft protection practices for closer scrutiny, in spite of recently increased overdraft regulation. The CFPB said its inquiry builds on previous efforts by the FDIC, Federal Reserve, the Comptroller of the Currency, OTS and NCUA . . .all of whom have issued supervisory guidance outlining best practices for overdraft protection. The CFPB feels that many of the regulator issued practices are not being followed.

Consumer advocates hailed the move, which they said could help bring a more comprehensive set of standards to the overdraft space, where they feel there is still a lot of confusion among consumers about what it means to opt in to overdraft protection.

The CFPB intends to scrutinize four areas:

1. reordering of transactions
2. missing or misleading information about the terms of overdraft programs
3. how those programs are marketed, and
4. whether they have a disproportionate impact on low-income and young consumers.

The CFPB has requested data from large banks about their overdraft protection practices, and is launching a campaign to let consumers know what they can do to avoid overdraft fees. It also intends to revisit a 2008 FDIC study that found that 9% of checking account customers bear 84% of overdraft fees, and that 46.6% of young-adult consumers have incurred overdraft fees.