ABA comments on CFPB proposed overdraft survey

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The American Bankers Association has submitted a letter commenting on the CFPB’s request for approval from the Office of Management and Budget to conduct “a national web survey of 8,000 individuals as part of its study of ATM/debit card overdraft disclosure forms.”

In its request, the CFPB stated that the survey “will explore consumer comprehension and decision-making in response to revised overdraft disclosures” as well as “financial product usage, behavioral traits, and other consumer characteristics that may interact with a consumer’s experiences with overdraft programs and related disclosure forms.” The CFPB also stated that the survey will include a representative sample of the U.S. adults that hold checking accounts and oversample respondents who are more likely to have experience with overdraft fees.

While indicating the ABA’s support for the CFPB’s “intention to survey consumers on their use of overdraft services and comprehension and decision-making regarding overdraft disclosure forms,” the ABA opposes the process followed by the CFPB to obtain OMB approval, calling it “defective and opaque.” In particular, the ABA objects to the CFPB’s decision to withhold the draft survey instrument in its OMB submission and urges the CFPB to resubmit its request for approval to OMB with the draft survey instrument and restart the 60-day comment deadline period.

The ABA observes that by only providing a generalized description of topics to be explored by survey questions and withholding publication of the draft survey instrument until after the first round of comments is received, the CFPB “will limit the public’s and OMB’s ability to assist the Bureau in producing a survey that will yield information of sufficient quality for its intended purpose.” According to the ABA, the CFPB’s “flawed approach” (to seek comment on only the survey methodology and the description of survey topics during the first round of public comment) “fails to recognize that it is impossible to separate issues related to the survey’s methodology from those relating to the form and order of the survey questions. Without access to the survey instrument, ABA and other commenters are severely limited in providing meaningful feedback.”

In the letter, the ABA asserts that the CFPB should include questions exploring how and why consumers use overdraft and survey consumers on two additional topics relating to adding information to the model consent form and consumer knowledge and use of the opt-out feature required for overdraft programs by Regulation E. Other suggestions made by the ABA include:

  • Ordering survey questions so that the more important questions (meaning those concerning how consumers use overdraft) are placed at the front of the survey and, to minimize the number of respondents who fail to complete the survey due to fatigue, limiting the number of questions.
  • Omitting vague questions that ask for subjective information about consumers’ state of mind, not actual behaviors and motivations of consumers who use overdraft services.

The ABA also raises concerns with the CFPB’s plan to divide the respondent sample into two subpopulations: (1) those with a “high propensity (i.e., likely to have experienced 3 or more overdrafts in the prior year”); and (2) the “general population, drawn from the rest of the consumer population.” The ABA does not believe that the proposed definition of individuals with a “high propensity” to experience overdrafts will adequately identify consumers who regularly use overdraft services. The ABA states, as it has done previously, that before proposing new overdraft regulations, the CFPB should survey regular overdraft users in order to understand their decision to opt-in and regularly use the service to meet short-term needs.

To that end, the ABA wants the CFPB to define a “regular user” as “a consumer who has accessed overdraft services at least seven times within a twelve-month period” (rather than three times as the CFPB has proposed). In the ABA’s view, someone who overdrafts less than seven times in a 12-month period “may do so due to reasons that do not demonstrate a deliberate decision to use overdraft services.” In addition, the ABA wants the CFPB to define a “regular user” as a consumer who has “experienced seven distinct overdraft events, not overdraft transactions.” The ABA observes that someone “who has forgotten his checking account balance may experience a number of overdraft transactions in one day, or even a number of overdraft transactions in a few hours, but those multiple overdrafts caused by a single error would not qualify that person as a Regular User.” The ABA also objects to the CFPB’s proposal to identify consumers who show a “high propensity” to overdraft frequently and not those who are actual regular users.

The CFPB has not yet indicated when (or if) it plans to propose a rule on overdrafts.  In its Spring 2015 rulemaking agenda, it stated that it planned “to release the results of further studies on overdraft programs and their effects on consumers. The CFPB is also considering whether rules governing overdraft and related services are warranted, and, if so, what types of rules would be appropriate.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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