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ABA: The American Bankers Association
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ABA to Congress: Respect and Protect Consumer Choice on Overdraft

WASHINGTON —

Regulatory policies should ensure consumers have a wide range of options to meet emergency expenses, including overdraft protection services, according to a statement for the record the American Bankers Association submitted for tomorrow’s hearing examining overdraft practices in the House Financial Services Subcommittee on Consumer Protection and Financial Institutions. In the statement, ABA urged Congress to respect and protect consumer choice.

“Consumers who do not seek access to overdraft services can open an overdraft-free option, which are widely available at banks across the nation; these include the prominently-branded Bank On-certified accounts, which are now available at institutions making up 56% of the U.S. deposit market share,” ABA said. “However, for those consumers who value access to overdraft, Congress should not presume to know what is best for consumers and deprive them of their choice by imposing additional restrictions that would reduce availability of these important services. These restrictions would prevent important payments from being paid, deny customers access to liquidity, and cause customers to incur additional fees and inconveniences. Rather than protecting consumers who choose to access overdraft services, these proposals may drive customers from the banking system and to payday and title lenders, pawn shops, and other nonbank financial service providers.”

Among other steps, ABA recommended that Congress direct the Consumer Financial Protection Bureau to study why consumers use and value access to overdraft protection.

“Congress’ inquiry into overdraft services should not be based on selective anecdotes, unsupported assumptions about consumer behavior or Congress substituting its own view of what is ’best’ for consumers, but on an evidence-based understanding of regular users of overdraft protection—why they use the product, what they understand about their ability to opt in and out, and what their preferences are relative to available alternatives,” ABA said.

The hearing comes on the heels of new survey data that found consumers overwhelmingly value overdraft services. The February 2022 survey of 2,210 U.S. adults conducted by Morning Consult on behalf of ABA found that:

  • 9 in 10 consumers (89%) find their bank’s overdraft protection valuable;
  • 3 in 4 consumers (74%) who have paid an overdraft fee in the past year were glad their bank covered their overdraft payment, rather than returning or declining the payment;
  • 61% of consumers think it is reasonable for banks to charge a fee for an overdraft; and
  • Three-quarters of consumers (74%) view overdraft fees as reasonable when large payments like mortgages or rent payments are covered and paid on time.

According to the survey, significantly more consumers indicated they would oppose (54%) rather than support (26%) a government proposal to prevent banks from offering overdraft protection.

Citing the existing availability of broad, nationwide access to affordable, overdraft-free transaction accounts – including Bank On-certified accounts – ABA said that: “Congress should not limit the choice of consumers who wish to have overdraft services when overdraft-free accounts are so widely available.”

The statement also highlights how banks of all sizes are helping customers avoid overdraft fees altogether by allowing more time to bring a negative balance into a positive position, providing real-time warnings about a low balance, and in some cases ending overdraft fees.

“The variety of options demonstrates a competitive marketplace that is responding to consumer preferences and competitive forces,” the statement says.

Click here for a copy of ABA’s full statement for the record.

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About the American Bankers Association

The American Bankers Association is the voice of the nation’s $23.7 trillion banking industry, which is composed of small, regional and large banks that together employ more than 2 million people, safeguard $19.7 trillion in deposits and extend $11.2 trillion in loans.

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