CFPB to Inquire About Overdraft and Courtesy Pay Programs

Written by Steve Van Beek

There was no shortage of information yesterday regarding the CFPB's first steps toward reviewing overdraft programs.  I was just mentioning a few weeks ago how the CFPB has the ability "to drop" a new issue without advanced notice to the industry.  This could be labeled as Exhibit A.  

I'm sure quite a few other folks where enjoying a quiet Wednesday (yeah right) until they saw the news "CFPB to Review Overdraft Programs" come across their email inboxes.  And, while we are at it - what do the regulators have against February 22nd?  I know a lot of folks still get heartburn thinking about the February 22, 2010 deadlines from the Credit CARD Act.    

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A couple of quick points on the CFPB's inquiry:

• There is currently no proposed rule.
• The "Penalty Fee Box" information would require a large change to periodic statements.  Don't forget to scroll down to the second page for additional potential changes.
• The CFPB will be looking at more than just ATM and one-time debit card transactions.
• The CFPB has no trouble getting its message out to thousands of news sources.
• The $25 Big Mac is an endangered species.  I wouldn't be surprised to see a "reasonable and proportional" discussion take place which would limit the fee to the amount of the overdraft.  
• Credit unions can expect numerous calls and comments from their members.  Your members will be reading the news stories mentioned above.  Now might be a good time for additional training on your credit union's current policies.

This is just the first stages of the CFPB's inquiry as the CFPB is collecting data, comments and input from all interested parties.  This information will be the basis for the CFPB's decisions on which steps to take next - including future rule changes.

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Here is the information released yesterday from the CFPB:

• CFPB's Press Release
• Director Cordray's Prepared Remarks
• CFPB's Blog Post asking Consumers "What's Your Status?"
• CFPB's Notice and Request for Information
• The "Penalty Fee Box" Model
• Video: Cordray's Remarks and a Panel Discussion with Consumer Groups and Financial Institutions

Note: There was also a Town Hall Meeting in New York City.  If the recorded video is posted by the CFPB, I'll add a link to that as well.

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As you can see, the CFPB is not dipping a toe in the water.  They are climbing the diving board and preparing to make a cannonball.

Comments

[Jay Gould]

There is a difference between overdraft protection on check and bill payments and the one on card transactions. A missed bill payment can do real damages, such as a penalty or some other adverse action. On the other hand, a declined card transaction would only prompt the cardholder to use another card or cash for payment. The point is that, if only one of these protections would have to be made optional, that should be the one on card transactions, which is in fact the case.

Still, I don't think that banks should force their overdraft protection on check and online bill transactions on us, but the right thing should be to let consumers decide whether to opt into it or not. However, if you do opt in, you should be prepared to pay for it, because an overdraft is, after all, spending someone else's money and that has never been free.