Overdraft Warning Shots

Towards the end of 2021, there were several warning signals that overdraft practices will be getting plenty of attention in 2022.  The CFPB issued two separate reports, one on overdraft reliance and one on fee amounts and policies among institutions.  There were a LOT of statistics within those reports that you don’t necessarily need to know from a compliance perspective, but what you do need to know is that the CFPB has promised enhanced enforcement specific to overdrafts. 

Acting OCC Director Hsu recently chimed in on overdraft programs, pointing back to the CFPB’s reports and noted that current overdraft practices contribute to the fact that,…it is expensive to be poor.  Accordingly, Director Hsu noted that eliminating overdrafts would be the easiest way to eliminate related fees, and some financial institutions are doing just that.  Eliminating overdrafts; however, can also limit customers’ financial capacity and, as a result, Acting Director Hsu suggests the best answer may lie in reforming overdraft programs, rather than eliminating overdrafts altogether.  Acting Director Hsu recommended the following:

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Overdraft Warning Shots
  • requiring consumer opt-in to the overdraft program;
  • providing a grace period before charging an overdraft fee;
  • allowing negative balances without triggering an overdraft fee;
  • offering consumers balance-related alerts;
  • providing consumers with access to real-time balance information;
  • linking a consumer’s checking account to another account for overdraft protection; 
  • collecting overdraft or NSF fees from a consumer’s next deposit only after other items have been posted or cleared; and,
  • not charging separate and multiple overdraft fees for multiple items in a single day and not charging additional fees when an item is re-presented.

The FDIC also focused its December 10, 2021, issue of “FDIC Consumer News” on overdrafts and related fees.

It’s pretty clear the regulatory agencies do not like overdrafts and we won’t be surprised to see action taken in this area.  If you want to brush up on overdraft guidance, check out our webinar, “All About Overdrafts”, which is available now OnDemand.

Wondering what else may be on the horizon in 2022?  Check out the January 2022 edition of our magazine, Banking on BCC.


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