Comment Letter on FDIC's Proposed Overdraft Guidance

Published: September 27, 2010

Read the full comment

CRL and other consumer advocates filed a comment letter with the FDIC supporting most aspects of the agency's proposed guidance on overdraft. The groups also made recommendations on how the agency could go even further in protecting consumers from excessive overdraft fees.

Here is the summary of key recommendations from CRL, Consumer Federation of America, National Consumer Law Center, Consumer Action, Consumers Union, National Association of Consumer Advocates and U.S. PIRG.

KEY RECOMMENDATIONS:

  1. End excessive overdraft fees at FDIC-supervised banks:
    • Require that any account holder who chooses overdraft coverage receive the lowest-cost credit for which the account holder qualifies. Steering borrowers into higher-cost credit than they qualify for will no longer be tolerated in the mortgage context. It should not be tolerated in the overdraft context, either.
    • Instruct banks not to charge more than six overdraft fees within a 12-month period, consistent with the FDIC’s 2005 payday lending guidelines.
    • Establish a limit of one overdraft fee per month (coupled with the limit of six per year), rather than suggesting a “daily limit.” This requirement would be analogous to the provision of the FDIC’s payday loan guidance recommending no more than one loan outstanding at a time.
  2. Prohibit all methods of transaction processing that increase overdraft fees.
  3. Take swift action to stop aggressive or deceptive practices aimed at convincing customers to opt in:
    • Review opt-in solicitation materials and practices at each examination and intermittently.
    • Provide examples of what constitutes “deceptive” opt-in solicitations.
    • Prohibit banks from asking account holders more than once if they want to opt-in.
    • Assess disparate impact on communities of color.
    • Require a “Schumer-box”-like disclosure of the comparative costs of opting in to fee-based overdraft, other overdraft alternatives, and declining to opt-in.
  4. Require periodic reporting of data on overdraft program activity, particularly on those account holders incurring multiple fees.
  5. Require institutions to obtain account holders’ affirmative consent to overdraft coverage for paper checks and ACH transfers. This recommendation should be viewed in connection with our recommendation that account holders be enrolled in the least expensive form of overdraft coverage for which they qualify. As evident in the Regulation E “opt-in” context, requiring affirmative consent is not meaningful unless lower-cost options are fairly presented.

Issue:Overdraft Loans
Agency(-ies): Federal Deposit Insurance Corporation (FDIC)

CRL and other consumer advocates filed a comment letter with the FDIC supporting most aspects of the agency's proposed guidance on overdraft. The groups also made recommendations on how the agency could go even further in protecting consumers from excessive overdraft fees.