Pub. 11 2022 Issue 1 29 Research Reactions On Dec. 1, 2021, CFPB Director Rohit Chopra published prepared comments in conjunction with the published CFPB research. One comment emphasized that instead of being paid (in interest) for banks holding consumers’ money, consumers now pay large banks for this privilege, primarily through account service charges like overdraft fees. Chopra went on to liken an overdraft fee to interest paid on a short-term loan, using the example of a consumer being charged a $34 daily fee for a day or two for the bank covering the small negative balance in their deposit account, and how that would equate to an annual percentage rate (APR) of more than 10,000% on a loan. Chopra also said CFPB bank examiners will prioritize examinations of banks heavily reliant on overdraft fees, likely focusing again on call report data for this determination. “Financial institutions that have a higher share of frequent overdrafters or a higher average fee burden for overdrafting should expect us to be paying them close supervisory attention. Ultimately, we plan to inform institutions on where they stand relative to their peers with overdraft. We believe sharing that information will increase transparency and help against the race to the bottom we have seen in this market.”iv Industry Response In response to the CFPB’s claim to enhanced scrutiny into overdraft-related products, multiple large banks have begun slashing overdraft and insufficient fees or have drastically overhauled their overdraft products with more consumerbeneficial features. Here is a quick snapshot of some recent changes at large institutions: Cutting fees in these programs may be more of a challenge for smaller institutions that do not have the diversified revenue streams Katie Harrison, J.D., CRCM, Director that larger banks have. As your institution reviews its programs and procedures regarding overdraft protection and handling of insufficient funds, bear in mind the consumer protection regulations that may be applicable: • Regulation B – Equal Credit Opportunity Act • Regulation E – Electronic Fund Transfer Act • Regulation V – Fair Credit Reporting Act • Regulation Z – Truth in Lending Act • Regulation DD – Truth in Savings Act • Third-Party Oversight • Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) This article is for general information purposes only and is not to be considered as legal advice. This information was written by qualified, experienced BKD professionals, but applying this information to your particular situation requires careful consideration of your specific facts and circumstances. Consult your BKD advisor or legal counsel before acting on any matter covered in this update. i Consumer Financial Protection Bureau Announces Settlements with TD Bank for Illegal Overdraf t Practices, August 20, 2020, https://www.consumerfinance.gov/about-us/newsroom/cfpbannounces-settlement-td-bank-illegal-overdraf t-practices/. iiBureau of Consumer Financial Protection Settles With TCF National Bank, July 20, 2018, https://www.consumerfinance. gov/about-us/newsroom/bureau-consumer-financial-protectionsettles-tcf-national-bank/. iiiCFPB Research Shows Banks’ Deep Dependence on Overdraf t Fees, December 1, 2021, https://www.consumerfinance.gov/ about-us/newsroom/cfpb-research-shows-banks-deepdependence-on-overdraf t-fees/. iv Prepared Remarks of CFPB Director Rohit Chopra on the Overdraf t Press Call, December 1, 2021, https://www. consumerfinance.gov/about-us/newsroom/prepared-remarkscfpb-director-rohit-chopra-overdraf t-press-call/ Ally No more overdraft fees Bank of America Overdraft fee reduced from $35 to $10 on debit card purchases with insufficient balances Capital One Complete elimination of all overdraft and NSF fees JP Morgan Chase No overdraft fee until account overdrawn at least $50; No fees assessed until after a full day to restore overdrawn balances Allow access to direct deposit up to two business days early No NSF Fees
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