CBA Statement On CFPB’s Notice of Proposed Rulemaking on Overdraft

January 17, 2024

Consumer Bankers Association (CBA) President and CEO Lindsey Johnson today released the following statement after the Consumer Financial Protection Bureau (CFPB) issued a notice of proposed rulemaking that is the latest government price setting mandate from an administration desperate for a political win at the cost of underbanked consumers.

“From the development of next-day grace periods to the elimination of non-sufficient funds fees, banks for more than a decade, and particularly over the last several years, have innovated and competed to create a range of highly-tailored, consumer-friendly products that aim to support each bank’s consumers best – all without burdensome regulation or legislation. The CFPB’s own data shows that there has been a $5 billion reduction in overdraft fees from 2019 to 2022 because of these bank-led innovations – a nearly 50 percent drop since before the pandemic. The Bureau is not only late to the party with this misguided proposal, but this one-size-fits-all approach from Washington threatens to undo years of progress while also freezing innovation and competition. If enacted, this proposal could deprive millions of Americans of a deeply valued emergency safety net while simultaneously pushing more consumers out of the banking system.

“This proposal on overdraft price setting is just the latest in a myriad of unnecessary and costly regulations by this Administration that seems guided by political polling, rather than by sound policy created by what should be independent agencies. The aggregate costs and impacts of these proposals on Americans’ access to essential financial products and services have not been appropriately considered. This rulemaking and the Federal Reserve Board’s recent proposal on debit interchange, for instance, could dramatically reshape the economics of banking low-deposit consumers.

“We urge the CFPB to pull this misguided and politically driven overdraft proposal and we ask regulators to examine the cumulative impact of these regulations.”

Background

Whether they come from regulators or policymakers, the attacks on overdraft fail to reflect the growing number of innovative overdraft products and policies introduced over the past year by America’s leading banks to provide consumers with even greater choice and flexibility to meet their needs within the highly competitive and well-regulated banking system.  

The current overdraft marketplace highlights the competition and innovation banks have made in this space:  

  • Based on the voluntary changes that have been announced as of Aug. 25, 2022, overdraft fees are expected to fall by 68 percent between 2008 and the end of 2023.
  • These changes are expected to result in $167 in annual savings per U.S. adult by year end 2023.
  • As of August 2022, at least 29 financial institutions with more than $10B in assets have announced significant reforms to their overdraft policies. 
  • Curinos projects institutions with pledged and adopted reforms will reduce overdraft fees by 50 percent in the period 2019 to 2023. 
  • If current trends continue, consumers could save more than $28B in the five-year period between 2021 to 2025.
  • Overdraft revenue comprises less than two percent of annual industry revenue and less than four percent of industry net income.

CBA Advocacy 

  • To view CBA’s Overdraft Facts microsite that highlights bank-led innovations in overdraft that have already resulted in billions in consumer savings, click HERE.
  • To read CBA’s July 2023 letter to the Senate Banking Committee’s Financial Institutions and Consumer Protection Subcommittee reiterating opposition to the Biden Administration’s ongoing “junk fee” campaign that misrepresents well-regulated bank fees, click HERE.
  • To read CBA President and CEO Lindsey Johnson’s op-ed urging policymakers to recognize the impact of recently unveiled bank-led overdraft innovations designed to expand choice, strengthen transparency, and lower costs for hardworking consumers, click HERE.
  • To read CBA’s letter in opposition to H.R. 4277, the “Overdraft Protection Act,” that would restrict consumer access to a safe emergency liquidity option, click HERE.
  • To read CBA’s April 2022 comment letter responding to the CFPB’s RFI regarding fees charged by banks, click HERE.
  • To read CBA’s March 2022 letter sent to the House Financial Services Committee’s Consumer Protection and Financial Markets Subcommittee on bank-led overdraft innovations, click HERE