Dems Turn to CFPB to Control Overdraft Fees
Rep. Carolyn Maloney (D- N) lamented this week that her proposed bill to reform bank overdraft fees will likely stall in the House as partisan politics continue to hamper Congress. In light of Congressional inaction, Rep. Maloney is encouraging the Consumer Financial Protection Bureau (CFPB) to address rampant and unfair overdraft fees through agency rules and enforcement. Rep. Maloney hopes that her bill can serve as a template for CFPB rulemaking on the topic.
Overdraft fees serve as a big source of revenue for banks, contributing $32.5 billion to bank coffers in 2015 alone. Surveys have shown that many consumers would actually prefer if the bank denied a transaction when there are insufficient funds in the account, instead of charging an overdraft fee and letting the transaction take place.
In August, the CFPB issued a report detailing the proliferation of overdraft fees and suggested standard disclosure forms that help account holders understand the fees. Consumers would have the option of opting into overdraft coverage after reading the disclosures. The CFPB’s report was quickly denounced by the American Banker’s Association for using outdated information and insufficient data in the agency’s analysis. In its response to the CFPB report, the trade association noted that many banks have stopped predatory practices like reordering transactions. The average fee for an overdraft now stands at $33.38, up $0.34 from the previous year.