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Compliance Corner: CFPB Releases Data Point on Checking Account Overdrafts

By Cheryl Lawson, EVP-Compliance Review

The Consumer Financial Protection Bureau (CFPB) has issued a Data Point: Checking account overdraft report which provides an analysis of overdraft transactions in several large banks. This data was collected during the CFPB’s analysis of banks and includes data from the same institutions analyzed in the 2012 Study of Overdraft Programs. No credit unions or thrifts were included in the study, nor any banks with assets under $10 billion.

Transaction data on roughly two million accounts over an 18-month period provided the CFPB researchers with some key insights regarding overdrafts. While financial institutions included in this study do not provide fully disclosed overdraft programs, the data is instructive.

Because the CFPB analysis represents customers who were not provided information on how the bank responds to overdrafts, the consumer behavior is not representative of all financial institutions. Where fully disclosed overdraft programs are in place, consumers are not ‘surprised’ by overdraft costs. In these situations, consumer use of overdrafts reflects the needs of their household and their ability to finance the overdraft or NSF fee. 

And while CFPB Director Richard Cordray has stated in interviews that nothing in the report implies that banks and credit unions should be precluded from offering overdraft coverage, he has stressed the need to determine whether current overdraft practices are causing the kind of harm that consumer protection laws are designed to prevent. 

The release of this data point report has not accelerated the CFPB’s rulemaking calendar. Further “prerule activities” relating to overdraft practices are not expected until February 2015. 

 As these regulatory conversations continue, now is the time for banks and credit unions to take the steps necessary to ensure that they are providing an overdraft solution that is in line with compliance expectations. For more than 25 years JMFA OVERDRAFT PRIVILEGE® has included a strong emphasis on strategies that enhance safety and soundness—and has been implemented without regulatory criticism or negative remark. 

To learn more about our ongoing efforts and where we see the industry is going contact us to find the representative for your region.