OCC Reviewing Banks’ Overdraft Policies
Acting Comptroller Michael Hsu recently announced that the Office of the Comptroller of the Currency (OCC) is reviewing bank overdraft policies— an announcement that came during testimony in front of the Senate Banking Committee earlier this month.
“We must prohibit predatory and discriminatory practices while promoting financial inclusion and increased access to credit for the unbanked and underbanked,” Hsu said in his prepared testimony. “Overdraft programs are a good example. This committee recently shined a light on the harms to consumers from excessive fees related to overdrafts. It is unacceptable for bank customers to get trapped in a cycle of high cost debt. I look forward to seeing greater innovations by banks for programs that can help customers navigate unexpected needs for credit.”
At the hearing, Senator Chris Van Hollen (D-Md.) brought up that many small banks profit greatly from overdraft fees. He also noted that some community banks made more money on the fees than profits in 2020. Though Hsu did not share specific details on how the OCC plans to address overdraft policies, he said that any large concentration in bank revenue is a supervisory concern.
Many lawmakers have pushed legislation to reform overdraft fees and make banks be more transparent about them. In June, Representative Carolyn Maloney (D-N.Y.) introduced the Overdraft Protection Act, which would prohibit banks from charging a customer more than six overdraft fees per year.
“Some of the larger banks have really started reforming their overdraft programs and policies to make them less punitive and more flexible,” said Hsu. “We’re encouraging all the large banks to do exactly that, to rethink [overdraft], so that it’s both fair and it provides the flexibility that people need.”
Banks such as Frost Bank, Huntington Bank, and PNC have revised their overdraft policies in the last few months to include grace periods and account notifications. Other financial institutions, such as Alliant Credit Union and Ally Bank, have completely eliminated overdraft fees.