ABA Statement on CFPB’s Proposed Rule to Limit Overdraft Protection

“Today’s proposal from the CFPB marks the Bureau’s latest attempt to demonize and mischaracterize highly regulated and clearly disclosed bank fees for a service that surveys consistently show Americans value and appreciate. The proposal would make it significantly harder for banks to offer overdraft protection to customers, including those who have few, if any, other means to access needed liquidity. The CFPB is effectively proposing to take away overdraft protection from consumers who want and need it.

“A recent survey conducted by Morning Consult found that 9 in 10 consumers (88%) find their bank’s overdraft protection valuable, and nearly 8 in 10 consumers (77%) who have paid an overdraft fee in the past year were glad their bank covered their overdraft payment, rather than returning or declining payment. And while no one likes to pay fees, 63% of consumers said it’s reasonable for banks to charge a fee for an overdraft, as opposed to only 24% who think it’s unreasonable.

“The CFPB proposes to apply Regulation Z to overdraft services offered by large banks above a ‘breakeven’ fee amount. The CFPB has no legal authority to subject overdraft services offered by any financial institution to Regulation Z, much less impose a price cap on the provision of these services to consumers.

“The proposal also fails to fully acknowledge and appreciate the significant voluntary changes many banks have already made to their overdraft programs, including the growing availability of accounts that do not charge overdraft fees, such as Bank On certified accounts. The proposal would upset this competitive market, restricting access to overdraft with a government-imposed price cap.

“In an effort to score political points, the CFPB is seeking to eliminate a valuable service and push consumers who need overdraft protection into the hands of less-regulated, more-costly alternatives. We will review this proposal with our members and craft an appropriate response that identifies the flaws in the Bureau’s approach.”