Measuring the impact of financial institution overdraft programs on consumers
In December 2021, the CFPB published two research reports on current account overdraft fees, detailing how banks continue to rely on these fees as a major source of revenue and how they do not compete on transparent prices and initials. At that time, CFPB Director Rohit Chopra announced that financial institutions with a higher share of frequent overdrafts or a higher average charge for overdrafts should expect the Bureau to give them oversight. narrow. These often abusive and hidden charges can have a significant impact on a family’s bank account and therefore we monitor these institutions closely.
Since the beginning of the year, we have been piloting a supervision effort to collect key metrics from selected supervised institutions regarding the impact on consumers of their overdraft and insufficient funds (NSF) practices. We asked more than 20 institutions for data on five consumer impact indicators:
- Total annual amount that consumers receive in overdraft coverage compared to the amount of fees charged.
- Annual dollar amount of overdraft fees charged per active checking account.
- Annual dollar amount of NSF fees charged per active checking account.
- Prevalence of frequent overdrafts: the share of active current accounts with more than 6 and more than 12 overdraft charges and/or without funds per year.
- Share of active current accounts that have opted for overdraft programs for ATMs and one-time debit transactions
In addition to these metrics, our oversight team seeks detailed information about entities’ overdraft practices, including how they assess their fees, grace periods, dollar thresholds above which fees are assessed, and caps on the number of charges billed per day, or per statement period.
We intend to use this information to identify institutions for further review and investigation. We also plan to provide feedback to each institution, as well as share this information with other regulators. This monitoring information will not be made public but is intended to support our ongoing work.
We are encouraged that some banks and credit unions are vying for consumer business by changing their overdraft and NSF check programs. We will assess how these changes are implemented. Many banks still need to improve their practices. Our hope is that, through the Bureau’s collection and sharing of these metrics, institutions can better understand the impact of their overdraft practices on their consumers relative to their peers, and that this knowledge will further drive competition and improve outcomes for American families.
If you have a problem with a consumer financial product or service, you can file a complaint with the CFPB online or by calling (855) 411-2372. You can also try contacting the company. Companies can usually answer questions specific to your situation and more specific to the products and services they offer.