CFPB Policy Reminder Says Banks Must Maintain Proof Consumers Opted In to Overdraft Fees

The Consumer Financial Protection Bureau (CFPB) recently said in a policy reminder that banks must keep evidence that customers have opted in to overdraft coverage. As a default, regulators should assume that consumers have not agreed to coverage and fees unless banks can provide recorded conversations or signed documents.

“The CFPB has found instances where banks have no evidence that they obtained consent for overdraft,” said CFPB Director Rohit Chopra in a statement, according to Banking Dive. “No Americans should be hit with bank account fees that they never agreed to.” The CFPB is fighting “phantom opt-in” agreements, where banks claim they have consumer consent, but have no proof.

Under the Electronic Fund Transfer Act’s Regulation E, overdraft coverage is an opt-in process instead of a default that consumers would opt-out of, the CFPB said. Proof that consumers opted-in to the coverage can include a signed form, a recorded phone call, or an unchangeable electronic signature.

The agency’s policy reminder is meant to continue boosted consumer protections against overdraft fees charged for one-time purchases and ATM withdrawals. Many banks like Capital One and Citi stopped charging overdraft fees, while others like Wells Fargo and Bank of America greatly reduced them.

The CFPB hopes to root out overdraft malpractices, like when Virginia-based Atlantic Union Bank agreed to pay the bureau $6.2 million in settlements last year to settle allegations that it enrolled thousands of customers into overdraft programs without the proper disclosures.

Additionally, the CFPB proposed reducing overdraft fees to between $3 and $14 for banks with over $10 billion in assets.