By Cheryl Lawson JMFA EVP of Compliance Review Washington Update House Considers Overdraft Program Fee Reform On March 31, the U.S. House of Representatives Financial Services Subcommittee held a hearing on possible government intervention regarding the future of overdraft programs. The hearing comes after an initiative announced by the CFPB to reduce “exploitative junk fees” and the highly publicized steps taken by big banks to eliminate or reduce overdraft fees. Testimony from the hearing highlighted two very different perspectives on the role government should play in regulating overdraft fees. On the one hand, lawmakers argued that overdraft fees can have a disparate impact on some consumers, citing that “just 9% of consumers pay 80% of the reported $10B to $12B in overdraft and NSF fees in an average year.” On the other hand, several representatives raised concern over the unintended consequences that eliminating overdraft fees would pose in “reducing consumers’ ability to access short-term liquidity financial products.” In addition to their testimony, Representatives highlighted the results of a recent Morning Consult survey that found 90% of respondents valued overdraft protection, and 72% of respondents who paid a fee in the last year were glad their bank paid the overdraft. The survey also found that 62% of respondents think overdraft fees are reasonable, with only 21% indicating the fee was unreasonable. Input from industry trade groups expressed support for a fair, transparent and competitive market for consumer financial services. But it cautioned the committee that further regulation that could eliminate overdraft protection programs would likely negatively impact consumers and financial institutions. The hearing coincides with potential new legislation – issued in a discussion draft by committee chair Maxine Waters – that would require banks with more than $10B of assets to offer no overdraft accounts. In addition, the www.coloradobankers.org 10
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