CFPB and Overdrafts: No More Mr. Nice Guy

December 2, 2021 at 9:47 am 1 comment

Yesterday, the CFPB released two reports detailing the overdraft fee practices of both large and small banks and credit unions. While this in itself is not all that surprising, after all the CFPB has grumbled about overdraft fees since its inception, when coupled with the statements of Director Chopra, it’s clear that overdrafts are going to be a major focus of the Bureau in the coming months.

In fact, the Director sounded very much like a former member of the FTC, when on a conference call with reporters, he reportedly described the continued reliance of big banks and overdraft fees as a market failure which regulators had to address.

While it is not clear what steps the Bureau will take, institutions directly subject to the CFPB’s oversight can expect increased scrutiny. He even suggested that this scrutiny may extend to individual executives who approve practices.

A second noteworthy aspect of the Bureau’s announcement yesterday is a use of core processor data to analyze the practices of smaller banks and credit unions. Specifically, one of the reports is based on the settings used by banks and credit unions to trigger overdraft payments. This information was obtained not from financial institutions but from going directly to their core processors. 

The bottom line is that your credit union should continue to anticipate a world in which it must be less reliant on overdraft fees and in which disclosures accurately describe when overdraft fees will be triggered.

On that note, I am heading to Buffalo where I hope to talk to some of you at this evening’s chapter event.

Entry filed under: General. Tags: , .

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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