In response to a request for comment, CRL offered feedback to the Consumer Financial Protection Bureau about the agency's proposed rule addressing prepaid cards . The CFPB's proposed rule would expand consumer protections on prepaid cards in significant respects. The CRL comment focuses on credit products associated with prepaid cards – with a particular focus on overdraft fees. The CRL comment strongly urges the CFPB prohibit any overdraft charges on prepaid cards. CRL's comment supports that CFPB's proposal would apply stronger regulations to overdraft fees on prepaid cards than the wholly...
Excessive overdraft fees charged by banks and credit unions can cause devastation for financially vulnerable families. Many lenders used predatory policies and practices designed to repeatedly extract excessive fees from customers who could least afford them. Overdraft fees are a leading cause of financial institutions closing a consumer’s account and reentry into the banking system often is exceedingly difficult, increasing the financial insecurity of many consumers. CRL advocates for legislators and regulators to rein in the size and frequency of these fees. We estimate that the savings from these fee eliminations will be between $3 billion to $4 billion for working families.
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Some colleges and banks enter into exclusive agreements to offer students checking accounts – usually these accounts come furnished with a debit card that prominently displays the school logo and can sometimes be used as student ID. For banks, these exclusive agreements mean a captive audience for their bank products (checking accounts, credit card accounts) and usually a customer for life. Studies suggest that banks are a "sticky" product – once a consumer chooses one, they're unlikely to change. For colleges, these exclusive agreements mean increased revenue. These partnerships may include...
Although the Military Lending Act has resulted in significant improvements, Service members continue to be the target of predatory lenders. In 2012, members of the military filed 61,642 complaints with the Federal Trade Commission's Military Sentinel system. Twenty-two percent of complaints filed by enlisted members were about debt collection, banks/lenders and credit cards. The Department of Defense (DoD) invited comments on whether to expand the Military Lending Act, particularly focusing on whether DoD should expand the current law's definition of "consumer credit." CRL and other groups...
In spite of regulatory changes in recent years, many banks and credit unions continue to charge abusive fees on debit cards and checking accounts. In "High-Cost Overdraft Practices," CRL discusses these findings: In 2011, overdraft fees cost consumers $16.7 billion. Debit card transactions trigger the most expensive fees. On debit card purchases, the median overdraft charge is $35 for a $20 overdraft. Debit card purchases and ATM transactions account for at least 35% of all overdraft fees. Two-thirds of these penalty fees are paid by account holders charged more than six fees per year. Banks...
This chapter in the State of Lending report series presents a picture of the overall financial status of U.S. consumers today. It is based on data from the Consumer Expenditure survey, the Survey of Consumer Finances, and other national data sources. These sources reveal that, since 2000, American families have faced declining real incomes,a higher cost of living, greater debt levels, and declining asset values and wealth. Rebuilding the tenuous balance sheets of American households will require access to safe and affordable credit, along with strong protections to prevent predatory lending...
Bringing the "unbanked" into mainstream banking is good policy only if new account holders are not subject to financial practices that strip funds from these new accounts. Unfortunately, today's mainstream banking environment is fraught with danger for families who do not have a significant cushion of cash at their disposal. Local, state and federal agencies; civic organizations; and financial institutions are partnering in bringing these families into the mainstream. These stakeholders should ensure that programs promoting mainstream banking do not unintentionally create a supply of customers...
CRL joined with CFA and NCLC to provide the CFPB (Consumer Financial Protection Bureau) with documentation of bank overdraft practices and their impact on consumers. The CFPB should stop banks from reordering transactions and should prohibit overdraft fees on debit card transactions, which can easily be declined at no cost.
The Center for Responsible Lending commented on Capital One's proposed acquisistion of ING Bank at a public meeting held by Federal Reserve on September 20, 2011. Summary CRL has done extensive research and policy work addressing checking account overdraft practices that cause significant harm to bank customers. We are concerned that Capital One's current overdraft practices are out of step with significant reforms other large institutions have recently implemented. These practices include continuing to charge high overdraft fees on debit card point-of-sale and ATM transactions, and posting...
CRL supports the principles laid out in the OCC's proposed guidance on overdraft and bank payday loans, but hopes the OCC will dramatically strengthen its guidance to address existing problems and to avoid inadverdently entrenching abuses. Among our recommendations, CRL urges the OCC to act quickly and decisively to stop payday lending before it becomes pervasive among banks. CRL also urges the agency to stop its banks from posting transactions in order from highest to lowest to increase overdraft fees.