New rules on overdraft protections and fees are one of the top items on the CFPB regulatory agenda this year. In its Fall 2014 Rulemaking Agenda, the CFPB noted that they were “continuing to research overdraft services and considering whether rules governing overdraft and related services are warranted and what such rules may be” and that “a possible rulemaking might include disclosures or address specific acts or practices.” It is widely expected that the CFPB will propose new overdraft rules in early 2015.
In July 2014, the CFPB released a report that said that small debit card purchases lead to expensive overdraft fees. According to CFPB Director Cordray, the report showed “that consumers who opt in to overdraft coverage put themselves at serious risk when they use their debit card.” “Despite recent regulatory and industry changes, overdrafts continue to impose heavy costs on consumers who have low account balances and no cushion for error. Overdraft fees should not be ‘gotchas’ when people use their debit cards,” Cordray stated in the accompanying press release.
According to one article in the Credit Union Times, the possible direction of new regulations for overdraft protection was indicated in a letter last fall from Rep. Carolyn Maloney (D-N.Y.) to CFPB Director Richard Cordray, drawing on the agency’s report on overdraft fees. In that letter, Congresswoman Maloney urged the CFPB to extend opt-in overdraft rules currently applying to ATM withdrawals and non-recurring point-of-sale transactions to include checks and ACH payments. The article notes that many credit institutions extend automatic overdraft protection unless a customer opts out of it.
Maloney, the top House Democrat on the Joint Economic Committee, also urged the CFPB to adopt rules requiring overdraft fees to be “reasonable and proportional.” She noted that small overdrafts of $24 were charged a median overdraft fee of $34, yielding a 17,000% interest rate on an overdraft resolved within three days.
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