WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) released a proposed rule to require the nation’s largest banks and credit unions to comply with consumer credit protections for their overdraft programs.
“The CFPB’s proposal would rein in a junk fee that has gouged financially vulnerable families for far too long,” said Mike Calhoun, president of the Center for Responsible Lending (CRL). “High-cost overdraft fees exploit consumers right when they are out of funds. In moving to protect consumers from this harm, the CFPB is carrying out its mission."
Calhoun added, “We will fully review this proposal and suggest ways it can be strengthened. We encourage the CFPB to complete this overdraft rule without delay.”
Overdraft programs were exempted from credit rules decades ago when they operated as courtesy programs to help customers avoid bouncing an occasional check and getting banned by retailers. In subsequent years, they have become unsupervised lending programs that generate excessive profits from hardworking families.
A single overdraft fee often costs as much as $35, an amount that bears no relation to the minimal cost to the depository institution of covering the overdraft. Some depositories levy this fee three or more times a day, which can quickly pile hundreds of dollars in debt onto financially overburdened, low-income families.
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