CFPB Report Details Impacts of Overdraft Fees on Economically Insecure Older Adults
The Consumer Financial Protection Bureau recently released a report highlighting how overdraft fees affect economically insecure older adults. Most financial institutions charge an overdraft fee when a consumer does not have enough funds in their account to cover an expense, and some can be as high as $36.
“Although older adults as a whole incur overdraft fees less frequently than other age groups, economically insecure older adults are particularly impacted by overdraft fees because they are often unable to adjust their carefully managed budgets to pay unexpected fees,” the report reads.
Older adults could be more likely to incur overdraft fees for multiple reasons, like losing a partner, relying on Social Security benefits, caregiving responsibilities, cognitive impairment, or limited access to financial technology. Many older adults submitted concerns about overdrafts to the CFPB in February, notably those living on a limited income.
The Bureau found that nearly 15 percent of adults ages 62 and up have experienced overdraft fees. However, 87 percent of overdrafts assessed to older adults are carried by only 7 percent who experience overdrafts at least three times per year.
Like many other consumers, older adults complained about delayed deposit processing, financial institutions processing larger withdrawals before smaller ones, challenges with third-party recurring payments, and fraud-related transactions.
Older adults are less likely to overdraft than younger consumers, but they often have a more difficult time absorbing the cost into their monthly budgets. They may need to forego medical prescriptions or appointments, or meals and other necessities to cover overdraft fees.
“Economically insecure older adults may ultimately become unbanked when they feel their needs are not being met by the banking system, or when their account is closed and they are unable to open a new account due to a history of unpaid fees,” the report concluded.