Looming CFPB Overdraft Rules Could Hit Some Banks Harder Than Others

May 28, 2013
American Banker  
overdraft news

Future overdraft rules likely will have a bigger impact on banks that have not changed their practices much since a 2010 rule requiring them to give customers a choice on overdraft coverage. Although the rule applies across the board, Moebs Services reports that overdraft penalties are inconsistent -- ranging anywhere from $7.50 to as high as $40 -- and that opt-in rates among banks are all over the board as well. The Consumer Financial Protection Bureau, concerned that some banks may have provided confusing or misleading information about their overdraft programs, is investigating the discrepancies. "I think that how aggressively banks marketed it had a big impact on their opt-in rates," speculates Rebecca Borne of the Center for Responsible Lending, who adds that "a lot of banks still post high-to-low. It does continue to be a big problem." In response to these and other issues, the CFPB plans to release a report this spring, with new rules to follow. Consumer groups are hoping for enhanced disclosures, a ban on reordering transactions from highest amount to lowest amount, and a requirement that overdraft fees be proportional to the bank's costs. Banks that already have clarified their disclosures or changed how they process transactions may not be greatly affected by any new overdraft rules; but banks like TCF Financial, Regions Financial, Synovus Financial, and First Horizon Financial that have a heavy reliance on overdraft income, based on a report from Compass Point, may suffer financially under new regulation.
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