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CFPB to Increase Oversight over Bank Overdraft Fees

Based on two new research reports (see here and here) the CFPB will increase supervision of banks that are heavily reliant on overdraft fees and "will be taking action to restore meaningful competition to this market."

The researchers found that banks rely heavily on overdraft and non-sufficient funds revenue to feed their profit models and that overdraft fees present serious risks to consumers. The researchers found that in 2019, overdraft and non-sufficient funds revenue reached an estimated $15.47 billion, which was almost two thirds of the market's overall reported fee revenue. Due to the risk to consumers, the CFPB stated they will enhance their oversight of this practice.

Further, "using the most detailed and wide-ranging quantitative data the Bureau or others have collected on overdraft policies, practices, and outcomes at small financial institutions," researchers reported that in 2014, 92.9% of smaller banks and 60.9% of credit unions had an overdraft program," and "while overdraft and NSF fees were 13 to 19% lower at small banks and credit unions than at large banks, credit unions and small banks with an overdraft program earned $42.33 and $40.37 in annual overdraft revenue per account, respectively, which was just 6% and 11% less than large banks."

Primary Sources

  1. CFPB Press Release: CFPB Research Shows Banks’ Deep Dependence on Overdraft Fees

  2. CFPB Report: Data Point - Checking Account Overdraft at Financial Institutions Served by Core Processors

© Copyright 2022 Cadwalader, Wickersham & Taft LLPNational Law Review, Volume XI, Number 336
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