A survey of banks conducted by the Consumer Bankers Association (CBA) looks at how the Consumer Financial Protection Bureau’s (CFPB) proposed rule on overdraft would impact consumers.
The survey found that more than 90 percent of banks that responded said that any of the CFPB’s proposed overdraft fee caps would reduce the amount of overdraft-related liquidity they are able to offer to consumers.
Specifically, 92 percent of banks said that if the CFPB caps overdraft fees at either the $3, $7, or $14 levels, they would have to reduce the overdraft liquidity offered to their customers.
Thus, if the CFPB were to cap overdraft fees at $3 or $7, a majority of the banks would have to reduce overdraft liquidity by 76 to 100 percent.
And if the CFPB were to cap overdraft fees at $14, the highest price cap in its proposed rule, one-third of reporting banks responding to the question would have to reduce overdraft liquidity by at least 25 percent.
In a letter to the CFPB, CBA officials said the proposed rule on overdraft fails to appropriately address the likelihood of a widespread reduction of overdraft services, limiting access to a valued service utilized by millions of consumers.
“In the [overdraft proposal], the CFPB acknowledges the possibility that some consumers may be harmed by a reduction in access to discretionary overdraft products but nevertheless took the position that the CFPB was unable to quantify the impact,” the letter states. “We disagree with the premise that the CFPB lacks access to evidence to support the fact that the reduction in access to overdraft services could be significant. Nonetheless, in an effort to help the Bureau further consider this issue, CBA has conducted a survey of its members to assess the likelihood and scope of a loss of liquidity that would result from the implementation of its Proposal.”
CBA points out that banks have been able to reduce overdraft fees by 50 percent compared to pre-pandemic levels, while still preserving a critical form of liquidity for consumers.
CBA officials added that this survey demonstrates that the CFPB’s proposed rule would force many banks to reduce the amount of overdraft liquidity they offer. And considering the number of consumers who rely on these overdraft services, CBA said the potential harm to consumers could be substantial.