CFPB Report Indicates Impending Regulation of Overdraft Practices


On June 11, the Consumer Financial Protection Bureau (“CFPB”) issued its anticipated white paper on its study of bank overdraft programs. The 72-page Report: (1) discusses the recent Regulation E amendments and case law restricting overdraft procedures; (2) provides statistical information about bank overdraft programs; and (3) sets forth a rather complete description about how various bank overdraft programs actually operate and the various methods banks use in making funds available to consumers and in debiting consumers’ accounts. In the Report, CFPB Director Richard Cordray is quoted about overdraft programs, stating: “Overdrafts can provide consumers with access to funds, but the growing costs of overdraft protection have the capacity to inflict serious economic harm.”

The Report concludes by stating that the CFPB will continue to study overdraft programs, including through the analysis of account-level data, to examine the extent to which particular policies “magnify risks to consumers.” The likelihood that the CFPB will move to restrict practices in this area is highlighted in the press release and factsheet that the CFPB issued in conjunction with the Report. Both documents strongly emphasize that overdraft and non-sufficient funds (“NSF”) fees account for 61 percent of the total consumer deposit account service charges in 2011 among the banks studied in the CFPB Report.

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