CFPB Releases KBYO Overdraft Disclosure Prototypes

August 3, 2017

At 12:01 a.m. today, the CFPB unveiled new Know Before You Owe overdraft disclosure prototypes.  According to the agency, the disclosures are designed to improve the model form banks and credit unions already provide to consumers weighing POS/ATM overdraft coverage. The Bureau currently is testing four prototypes.  Each prototype has a one-page design aimed at making the costs and risks of opting-in to overdraft coverage easier for consumers to understand and evaluate.  The Bureau also published a study (Data Point) along with the model disclosures, which found the most frequent overdrafters are financially vulnerable, with lower daily balances and lower credit scores than those who overdraft less.



Know Before You Owe: Overdraft

The prototype model forms, like the Bureau's Know Before You Owe disclosures for mortgages and prepaid accounts, are designed to give consumers more clarity about a key financial decision. The CFPB developed the prototypes through interviews with consumers, and is now testing them more widely. The prototypes are aimed at making it easier to:


  • Understand the costs of opting-in; and
  • Evaluate the risks and benefits of opting-in.


CBA believes the release of the prototype disclosures is just an "FYI" of sorts and no formal comment period is being initiated.  Regardless, CBA will engage the agency after member consultation.   



CFPB Report on Frequent Overdrafters

The study spotlights frequent overdrafters — consumers who attempted to overdraw their accounts more than 10 times in a 12-month period.  The Bureau found 9% of accounts are frequent overdrafters, incurring 79% of overdraft fees. The study is based on data from several large banks collectively accounting for more than 40 million consumer checking accounts. Notably, the study found:


  • Opted-in frequent overdrafters typically pay almost $450 more in fees;
  • Frequent overdrafters carry low daily balances;
  • Frequent overdrafters have low or no credit scores; and
  • Frequent overdrafters use debit cards six times more often per month.


CBA will continue to monitor and update members on this issue.


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