What They Are Saying: Bank-Led Overdraft Innovations Are Making A Meaningful Difference In Consumers’ Financial Lives

December 13, 2023

WASHINGTON, D.C. – As the Consumer Financial Protection Bureau (CFPB) prepares to release a proposed rule that could force banks into a one-size-fits-all approach to their highly-tailored overdraft products, it is critically important for policymakers to recognize the widespread overdraft reforms implemented by America’s leading banks over the last decade to meet evolving consumer demands.

Here's what regulators, legislators, scholars, thought leaders, and the media are saying about these bank-led overdraft innovations, the impact they’re having in consumers’ financial lives, and the consequences of misguided regulatory action that could ultimately restrict access to one of the few remaining emergency safety net products in the well-regulated banking system today.

Regulators

CFPB Director Rohit Chopra: “I do want to commend a lot of the banks in the industry for really starting to compete now on overdraft. Many of them are showing their lower fees or the buffers they are provided.” [Testimony before the U.S. Senate Banking Committee, Nov. 30, 2023]

CFPB Director Rohit Chopra: “We are very gratified that this industry seems like it's competing again on [overdraft]…This has been a healthy move.” [Remarks at CBA LIVE 2023, March 25, 2023]

CFPB Director Rohit Chopra: “This is one of the beauties of a competitive market. When there is real competition […] people can benefit across the board.” [Testimony before the U.S. House Financial Services Committee, April 27, 2022]

CFPB: “Overdraft/NSF revenue for the fourth quarter of 2022 alone was approximately $1.5 billion lower than in the fourth quarter of 2019 – a decrease of 48 percent compared to before the pandemic, suggesting an annual reduction of over $5.5 billion going forward. This decrease suggests average annual savings of more than $150 per household that incurs overdraft or NSF fees; many households that have typically paid a high number of overdraft or NSF fees annually have saved much more.” [Data Spotlight Report, May 24, 2023]

Acting Comptroller of the Currency Michael Hsu: “Several U.S. banks […] have begun reforming their overdraft programs and making them more pro-consumer. This development holds the promise of relieving millions of deserving people from the high cost of making ends meet, while empowering them and improving their overall financial health.” [Op-Ed in American Banker, March 8, 2022]

Acting Comptroller of the Currency Michael Hsu: “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.” [Written Remarks, Dec. 8, 2021]

Legislators

U.S. Senator Raphael Warnock (D-Ga.): “In response to the uncertainty brought on our nation by the pandemic, many banks moved to waive fees charged to their customers. […] and I want to applaud those banks for making the right choice to help communities. […] Some of these same banks have now voluntarily made these changes permanent. And every month, to their credit, we hear of more following their peers in doing the same.” [Senate Banking Committee’s Financial Institutions and Consumer Protection Subcommittee Hearing on Examining Overdraft Fees and Their Effects on Working Families, May 4, 2022]

House Financial Services Committee Republicans: “By attempting to outlaw overdraft fees, CFPB Director Chopra risks killing financial products that help families make ends meet. Americans deserve options, not roadblocks, when it comes to accessing credit.”  [Post on X, Feb. 14, 2023]

U.S. Senator Thom Tillis (R-N.C.): “The American financial services system continues to provide unprecedented levels of consumer choice, and they are increasing every day. Some financial institutions have moved to eliminate overdraft fees. Others have drastically reduced fees associated with utilizing the service or increased overdraft coverage. What is abundantly clear across the board is that these institutions have taken these actions without the need for overarching or burdensome government regulation.” [Senate Banking Committee’s Financial Institutions and Consumer Protection Subcommittee Hearing on Examining Overdraft Fees and Their Effects on Working Families, May 4, 2022]

U.S. Rep. Blaine Luetkemeyer (R-Mo.): "The truth is overdraft is a legitimate short-term liquidity product that provides a vital service for consumers… At a time when 50 percent of Americans would have difficulty paying a $400 emergency expense, the actions of this committee and financial regulators aim to reduce consumers’ ability to access short-term liquidity financial products." [House Financial Services Committee Consumer Protection and Financial Institutions Subcommittee Hearing on Overdraft, March 31, 2022]

Scholars and Thought Leaders

Aaron Klein, Senior Fellow in Economic Studies at the Brookings Institution: “Many banks have announced sweeping changes to their overdraft policies. By my calculations, changes in policies announced by 14 banks, including most of the largest, will amount to $5 billion a year in savings for families living paycheck to paycheck. […] Industry made sweeping changes without any new legislation or new regulation […] and I commend these banks for their actions.” ­[Senate Banking Committee’s Financial Institutions and Consumer Protection Subcommittee Hearing on Examining Overdraft Fees and Their Effects on Working Families, May 4, 2022]

Alex Horowitz, Consumer Finance Project Director, and Gabe Kravitz, Manager, at Pew Charitable Trusts: “By 2023, six of the eight largest banks offered responsible small loans. Meanwhile, many large banks eliminated or substantially improved their overdraft programs. In just five years, loans that cost 15 times less than payday loans, with far superior consumer protections, became available nationwide to millions of individuals.” [The Pew Charitable Trusts, June 2, 2023]

Todd Zywicki, Professor at George Mason University: “Available evidence suggests that if these consumers were to lose access to overdraft protection, many of them would be forced to turn to payday loans to make ends meet... More important, simply reducing access to overdraft protection will not magically alleviate the underlying economic factors that lead consumers to use overdraft protection nor will it magically increase their access to other types of short-term liquidity such as credit cards.” [Written Testimony to the House Committee on Financial Services, March 31, 2023]

Bryan Bashur, Director of Financial Policy at Americans for Tax Reform: “Consumers benefit from overdraft protection by using it to make essential purchases… Ensuring that overdraft protection is not compromised by overburdensome regulation is especially important for individuals with lower credit quality.” [Americans for Tax Reform, Nov. 1, 2022]

Media

The Wall Street Journal Editorial Board: “Mr. Biden’s regulators are targeting common business practices that aren’t deceptive or unfair. In recent years, more banks have begun offering free checking accounts and other services. To cover their costs, they charge fees to customers who overdraw their accounts. This is now a target of the CFPB, which has issued guidance prohibiting “surprise” overdraft fees on debit transactions…Banning such fees could cause banks to restrict credit to lower-income customers who are more likely to overdraw their accounts…There’s no such thing as a free financial product. If regulators limit one source of revenue, businesses will find another to cover their costs.” [The Wall Street Journal, Feb. 13, 2023]

CBA Advocacy

  • To read CBA’s recent blog post on how the CFPB’s forthcoming overdraft proposal could stifle innovation and competition, 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 Senior Vice President, General Counsel, Head of Regulatory Affairs David Pommerehn’s testimony before the Senate Banking Committee Financial Institutions and Consumer Protection Subcommittee hearing on examining the effects of overdraft fees on working families from May 2022, 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.