A group of trade associations, including the National Association of Federally-Insured Credit Unions (NAFCU), are urging the Consumer Financial Protection Bureau to conduct more research before making any policy recommendations related to overdraft fees.
The groups sent a letter to CFPB Director Rohit Chopra following two reports issued by the bureau last month regarding the amount of overdraft and non-sufficient fees (NSF) received by credit unions and banks.
“As expected, these reports have stimulated policy discussion about overdraft, but we are concerned that the reports lack important facts about overdraft services—namely, information about the consumers who use and value the product,” the group wrote.
The associations stated that credit unions and banks have evolved the way they provide overdraft services offering a variety of overdraft programs that seek to fairly and transparently respond to consumer needs, as well as promote free choice. Plus, several banks and credit unions have recently announced they would no longer charge overdraft fees or eliminate returned item fees when the customer has insufficient funds in the account. Further, many credit unions and banks also offer several ways for customers to check their account balances via text or email alerts or through mobile apps.
The associations are asking the CFPB for clear policies on overdraft.
“The Bureau’s activities related to overdraft should not be a ‘gotcha’ exercise through enforcement. Instead, any changes to supervisory expectations or guidance applicable to overdraft should be made transparently and should be based on current and complete data. It is critical that any changes not push consumers outside of the mainstream banking system to meet their financial needs,” they wrote.
The groups urged Chopra to conduct a study of consumers’ preferences on overdraft protection to better understand the product before taking further action. Specifically, they recommend that the bureau focus on frequent users of overdraft, which constitute approximately 9 percent of all overdraft users, as they will be most affected by any changes. They would also like the CFPB to investigate the features that these consumers seek when they open a deposit account; why these consumers elect to opt-in to debit card overdraft protection; what they understand about their ability to opt-out and whether they have ever exercised that right; and what occasions or needs typically prompt overdraft use.
Getting feedback from consumers will provide evidence on the best course of action for the CFPB, noted the group.