CBA Urges Congress To Recognize Bank-Led Overdraft Innovations Delivering Greater Choice & Transparency For Consumers

March 30, 2022

In a new letter sent yesterday to the House Financial Services Subcommittee on Consumer Protection and Financial Markets, the Consumer Bankers Association (CBA) highlighted the bank-led overdraft innovations designed to meet evolving demand and cautioned against restricting a product millions of consumers knowingly use and value in times of need. The letter was sent ahead of a scheduled hearing on Thursday examining the movement to eliminate overdraft fees.

Protecting Access For Financially Vulnerable Americans

A 2018 Federal Reserve survey estimated nearly 40% of American adults wouldn’t be able to cover a $400 emergency with savings, alone. Recognizing the importance overdraft products have in the lives of financially vulnerable Americans to serve as an emergency safety net, the letter highlighted recent comments from Acting Comptroller of the Currency, Michael Hsu, who said:

“For those living paycheck to paycheck, the flexibility offered by low- to no-cost overdrafts can empower them to pay their bills on time, avoid high-cost alternatives, and improve their credit profile. […] Limiting overdrafts may limit the financial capacity for those who need it most.”

Bank-Led Overdraft Innovations Provide Consumers With Greater Choice & Transparency

Driven by a commitment to meeting evolving consumer demands, America’s leading banks have unveiled innovative financial tools to provide consumers the choice and flexibility they demand. As the letter highlights, these bank-led innovations, which have occurred without regulatory intervention, will add further value to consumers:

“These changes, in conjunction with clear disclosures, will add continued benefit to consumers that rely on overdraft services to cover short-term gaps in finances by continuing to provide a viable service that will come at minimal or no cost.”

Consumers Understand & Value Overdraft

Recent data from a December 2021 Curinos study found even as overdraft use has declined by 40% over the past decade, a majority of regular overdraft users knowingly use the product and value the emergency safety net it provides in times of need. In addition to encouraging lawmakers to consider these findings before taking future action, CBA also warned:

“Further restricting access to short-term liquidity options, such as overdraft services, would drive many families to predatory payday lenders and other expensive venues. […] It is our commitment to provide every consumer access to highly-regulated financial products and services.”

To read the full letter, click HERE.

CBA Advocacy

Ahead of Thursday’s hearing, CBA released a new video to correct misinformation surrounding bank fees, to underscore banks’ commitment to providing transparency and choice, and to highlight some of the bank-led innovations designed to meet evolving consumer demands.

In the video entitled The Power Of Choice, CBA conveys the benefits afforded to consumers within the highly competitive and well-regulated banking industry today:

In addition to highlighting bank-led innovations in the overdraft marketplace, CBA is also working to correct misinformation regarding fees charged for all products and services offered by banks. Specifically, in response to the CFPB’s ongoing examination of bank fees, CBA is working to underscore the following key takeaways for policymakers to consider in its upcoming comment letter to the Bureau:

  • Well-Regulated Industry: As opposed to many segments of the economy where Americans are charged fees, fee charges and disclosures in banking are heavily regulated at the federal and state levels. In some instances, these oversight requirements have been in place for more than half a century.
  • Highly Competitive Landscape: Because the banking industry is among the most competitive in the world, banks are incentivized to constantly review and modernize products and services – and potential fees that come along with them – to meet evolving demand and attract new customers, fostering even greater transparency and choice for consumers.
  • Empowered Consumers: Thanks to new bank-led innovations, consumers are now empowered with the financial tools they need to anticipate or avoid fees. In contrast to many fees charged by other industries, banks are required by law to disclose potential fees before a consumer chooses a product or service. Characterizing all fees as equal directly undermines long-standing efforts from policymakers and banks to adequately disclose terms and conditions to consumers.

Resources

  • Following the CFPB’s launch of a new initiative examining fees charged by banks and other financial institutions, CBA’s President and CEO Richard Hunt said: “This is fuzzy math at its best and political theater at its worst … To best serve America’s families and small businesses, the Bureau has a responsibility to communicate with clarity and precision.” To read the full statement, click HERE.
  • Responding to the Bureau’s renewed focus on fees charged by banks, CBA has worked to correct the record and deliver the facts about how emergency safety net products like overdraft are valued by millions of consumers in times of need. To learn more, click HERE.
  • To read the key findings from Competition Drives Overdraft Disruption, a comprehensive analysis of the overdraft marketplace conducted by the global intelligence firm Curinos, click HERE.
  • To learn more about how banks are working to deliver more choice and flexibility to consumers while helping them avoid unintended fees, click HERE.