WASHINGTON–An announcement by the CFPB that it will be taking a stronger stance on overdraft and non-sufficient funds (NSF) programs at financial institutions is being hailed by one consumer group.
As CUToday.info reported here, the Bureau announced last week it plans to act upon earlier research it said has shown that “overdraft presents serious risks to consumers, with under 9% of consumer accounts paying 10 or more overdrafts per year, accounting for close to 80% of all overdraft revenue.”
The Bureau further noted that new FDIC data reveal insured banks earned $69.5 billion in the third quarter of 2021, up 36% from the prior year. The CFPB said it will be enhancing its supervisory and enforcement scrutiny of banks that are heavily dependent on overdraft fees.
“This welcome research yet again illustrates the need to put an end to abusive overdraft fees—especially given that these fees are borne predominately by those who can least afford them,” said Rachel Gittleman, financial services outreach manager at the Consumer Federation of America. “Consumers cannot wait for banks to individually put an end to this practice, like Capital One announced yesterday. The cost is just too high—overdraft fees can cost consumers hundreds in a single day and can push people out of the banking system, exacerbating financial exclusion.”
Less Than 9% of Accounts, But…
The CFA pointed to CFPB data showing nearly 80% of all overdraft revenue is borne by less than 9% of consumer accounts whose account balances average $350 paying 10 or more overdrafts per year. The average overdraft fee is nearly $35, while the most common transaction to trigger overdrafts are debit card transactions and the overdrafts average for those transactions is just $20, according to the Center for Responsible Lending.
“Although the CFPB plans for cracking down on illegal overdraft practices through supervision and enforcement are welcome, the CFPB should enact a rule requiring all banks and credit unions to end this destructive practice that does far more to hurt consumers than to help,” Gittleman continued.