Overdraft Fee Disclosure Laws Coming Under Fire by the CFPB
Once again it seems that the Consumer Financial Protection Bureau (CFPB) is about to take steps to make life more difficult for consumers, and easier for big banks—the opposite of the reasons that the entire reason why the CFPB was founded. This time, the CFPB is looking to make it easier for banks to charge consumers for costly overdraft fees.
As you may have noticed when you open a bank account, banks give you the option of adding overdraft protection to your account. Overdraft protection prohibits a user from charging anything to their account if there are not enough funds in the account to cover the charge.
However, many people don’t want overdraft protection. Without it, the bank will let you charge amounts that exceed the amount in your bank account, but at a hefty price—sometimes as high as $35 per charge. Hypothetically, that means that if you charged something that cost $1 and you had $0 in your account, you would be charged your overdraft fee just for exceeding your balance by that $1.
It is a hefty and punitive charge that can add up for many consumers, who may easily exceed the amount in their accounts. Because of that, the CFPB has a rule that requires banks to get your written consent if you do not want overdraft protection (that is, if you want the bank to “cover” you for charges that exceed the money in your account). In that consent, the bank explains to you your overdraft charge.
Rule May Be Eliminated
The CFPB is now considering eliminating that requirement, or at least, making some kind of alteration to it that makes it easier for banks to charge overdraft fees. They are doing so under the false pretense that somehow eliminating the disclosure rule would make things easier for small businesses, even though small businesses don’t charge overdraft fees, banks do.
The attorneys general (AGs) for 24 states recently wrote to the CFPB, requesting the CFPB leave the existing rule alone. The AGs wrote that there is no support for the assertion that any burden is put on small businesses because of the overdraft rule. The AGs noted that the rule has been successful in allowing consumers to avoid overdraft fees, and if anybody is losing money because of the rule, it’s the banks that would like to be able to charge people overdraft fees without disclosing them in advance.
Some Bankers Want a Change
It’s worth noting that at least some of the banks don’t seem to be onboard with a change. Banking trade groups have written the CFPB saying that they urge the CFPB to leave the rule alone. However, the Credit Union National Association has come out in favor of changing the rule (while also complaining about other consumer friendly regulations, like the Telephone Consumer Protection Act) saying that credit unions charge less for overdraft fees than banks, and allow consumers an alternative to payday loans.
Don’t be the victim of harassing or unfair conduct by banks or creditors. Contact Jacobs Legal to speak with one of our Miami consumer rights attorneys today.