On Wednesday, February 3, 2016, CFPB Director Richard Cordray sent a letter to the nation's largest banks urging them to provide customers more access to checking accounts without overdraft protection and to market those accounts aggressively. The CFPB also held a Field Hearing on Checking Accounts in Louisville which featured remarks by Director Cordray.
Cordray's comments concerning the CFPB's effort to encourage the availability and marketing of deposit accounts without overdraft privileges, and its criticism of overdraft programs, included:
- Overdraft programs have become a significant source of industry revenues, and a significant reason many consumers incur negative balances.
- Problems with overdrafts can cause people to give up on the banking system or force them out of it altogether.
- The CFPB is encouraging banks and credit unions to offer deposit accounts that avoid overdraft fees, supports the same efforts of the FDIC, and applauds the Bank On organization's National Account Standards as an example of the kind of products that can be offered to consumers.
- Banks are not marketing account products without overdraft protection as they do those with it, and some do not offer options designed to prevent overdrafts.
- Banks and credit unions should be warned of their obligation to accurately report to consumer reporting companies the consumer's use of their checking accounts; the CFPB has found that some of the largest banks are not able to furnish accurate deposit account information, implicating millions of consumer accounts. Cordray announced the CFPB has issued a Compliance Bulletin that emphasizes the obligation to establish and implement reasonable policies and procedures to protect against the reporting of inaccurate deposit account information to consumer reporting agencies.
We will watch for further (and likely) developments by the CFPB to curb or regulate bank overdraft practices.