Bloomberg reports,Banks Face Hit From CFPB on $30 Billion in Overdraft Fees. Here are the highlights…..
Richard Cordray, the bureau’s director, said in an e-mailed statement about the report. “Overdraft fees should not be ‘gotchas’ when people use their debit cards.”
IDEA: Maybe we can stick the CFPB on some of the state auditing bodies if they care about “fair”?
Wayne Abernathy, executive vice president of the American Bankers Association, criticized the bureau’s annual percentage-rate analysis.
“Where is the logic in applying a yearly percentage rate to a fee intended for a service of no more than a few days?” Abernathy wrote in an e-mail.
IDEA: An APR is there to compare the cost of two types of credit. That’s not the situation here.
“Consumers value and appreciate the ability to cover expenses when they need to, from an institution they trust, without resorting to entities outside the heavily regulated banking system,” Richard Hunt, the group’s president, said in a statement. “These debit card services are completely optional.”
IDEA: Educate the consumer.
In the new study, the CFPB found that the majority of overdraft fees are incurred on transactions of $24 or less, and that more than half of consumers pay back negative balances within three days.
IDEA: Give people more options (not less) to cover anticipated over drafts.
A 2010 rule imposed by the Federal Reserve, the CFPB’s predecessor as the main consumer-banking regulator, required banks to obtain an affirmative “opt-in” from customers who want overdraft coverage when they swipe their debit cards. Without it, transactions are supposed to be declined at the point of sale.
IDEA: This is a was and is a good idea.
“Opting in for overdraft coverage for debit card and ATM transactions is an expensive way to manage a checking account,” Cordray told reporters.
IDEA: Again, the key word here is optional over draft protection fee.
A second area would address the order in which transactions are debited from a consumer’s account. A court case against Wells Fargo & Co. found that the bank manipulated the order of transactions to maximize overdraft fees.
IDEA: Makes sense. They should clear smaller transactions first.