WASHINGTON–The acting Comptroller of the Currency said his office is taking aim at overdraft programs and is calling on financial institutions to over “no-cost” options.
In remarks to the Consumer Federation of America’s Financial Services Conference, Michael Hsu said the OCC has identified principles for banks to implement what it is calling “responsible overdraft programs that benefit financially vulnerable consumers,” while continuing to encourage banks to offer other options for short-term, small-dollar credit.
Hsu said the OCC has conducted its own review of bank overdraft programs and identified “several features . . . that could be modified or recalibrated to support financial health.”
According to Hsu, those features include:
- Requiring consumers to opt in to overdraft programs
- Providing a grace period before charging an overdraft fee
- Allowing negative balances without triggering an overdraft fee
- Offering consumers balance-related alerts; providing consumers with access to real-time balance information
- Linking a consumer’s checking account to another account for overdraft protection
- Collecting overdraft or non-sufficient funds fees from a consumer’s next deposit only after other items have been posted or cleared
- Not charging separate and multiple overdraft fees for multiple items in a single day
- Not charging additional fees when an item is re-presented.
‘Enforcement Actions’ May be Needed
Hsu told the CFA meeting a “race to the top for the most pro-consumer overdraft program” could effectively reform banks’ practices, but also said “new rules and the credible threat of enforcement actions” is needed to bring about the reform the OCC is seeking. Hsu indicated his preference is for offering free overdrafts, rather than overdraft-free account options, such as Bank On-certified accounts, which can “limit financial capacity,” he suggested.
“For those living paycheck to paycheck, the flexibility offered by low- to no-cost overdrafts can empower them to pay their bills on time, avoid high-cost alternatives, and improve their credit profile,” Hsu stated.
Other Overdraft-Related Developments
As CUToday.info reported, the CFPB has also recently announced plans to bring greater scrutiny to overdraft programs.
As CUToday.info also recently reported, Capital One has become the largest bank to date to announce it is eliminating overdraft fees.
In addition, CUToday.info has also compiled a list of credit unions that have reduced or eliminated their NSF/OD fees.