CFPB Report Confirms Harm Caused by Overdraft Practices


Center for Responsible Lending
June 11, 2013

We are pleased the Consumer Financial Protection Bureau (CFPB) has begun an extensive analysis of bank and credit union overdraft programs. Overdraft fees—many of them encouraged and generated through unfair and deceptive practices—cost consumers billions of dollars each year.  Overdrafts are a particular problem when consumers use a debit card to make purchases or withdraw cash from ATMs. 

The CFPB report shows that requiring banks and credit unions to secure a consent form before charging customers overdraft fees on debit cards—the so-called “opt-in”—has not stopped unfair practices and is not a substitute for real reforms.  The analysis found that customers enrolled in overdraft coverage for debit cards end up paying much more in fees than other customers. The study shows that NOT opting in for this overdraft coverage saved frequent overdrafters $347 in just six months. 

We remain concerned about financial institutions that deliberately trigger overdraft fees by “reordering” daily transactions from the highest to lowest, often resulting in more fees from customers. This deceptive practice remains far too common despite fueling widespread litigation.  

The CFPB’s report also confirms that tactics to encourage overdrafts cause long-term harm to many consumers. Overdraft fees lead to involuntary account closures which, as the CFPB underscores, lead to difficulty opening accounts with other financial institutions. The CFPB report also shows that overdraft fees hit many consumers extremely hard; previous research has shown these tend to be those consumers least able to recover. 

We look forward to future studies by the CFPB that will shed even more light on an issue that affects millions of Americans each year. 

For more information, contact Kathleen Day in DC at 202.349.1871 or kathleen.day@responsiblelending.org; Graciela Aponte in Calif. at 510.379.5518 or graciela.aponte@responsiblelending.org; or Ginna Green at 510.866.5989 or ginna.green@responsiblelending.org.

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About the Center for Responsible Lending

The Center for Responsible Lending is a nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices. CRL is affiliated with Self-Help, one of the nation's largest community development financial institutions.