OCC Proposal Risks Legitimizing Abusive Bank Lending
Proposal on Bank Overdraft Fees, Payday Shows Need for CFPB
Center for Responsible Lending
June 13, 2011
New guidelines proposed by the Office of the Comptroller of the Currency (OCC) illuminate the abuses in banks’ overdraft and payday lending practices but don’t go far enough to bring lenders back in line. As a result, the OCC’s proposal risks legitimizing national banks’ abusive payday lending and overdraft fee practices.
The “safety and soundness” that the OCC holds as a high priority for banks goes hand in hand with prudent consumer safeguards. Banks risk damaging their reputation when they unfairly strip funds from customers. That hurts shareholders as well as families.
The OCC should issue far stronger guidelines, directing banks to eliminate payday products that systematically drain income from borrowers through extended cycles of high-cost debt. The OCC should also tell banks to end inappropriate debit card overdraft penalty programs that cost customers high fees that easily could be avoided. It’s promising that the OCC has told banks to stop reordering transactions to maximize the number of daily overdraft fees they can charge, but the bank regulator must be more explicit that high-to-low reordering, specifically, is wrong.
The OCC should never have allowed these abusive practices to flourish in the first place. The agency’s weak proposed guidelines reinforce the need for the Consumer Financial Protection Bureau, currently being challenged in Congress, as an agency focused on protecting consumers’ pocketbooks and bank accounts.
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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.