CFPB: Small-Dollar Overdrafts Are Big Problems for Some (Aug. 5, 2014)
Debit card-initiated overdrafts are leading to disproportionate charges for cardholders, with fees often larger than the overdraft amount, according to a new report by the CFPB. The study found that the majority of debit overdraft fees were incurred on transactions of $24 or less, while the median overdraft fee was $34.
While overdrafting can provide consumers with access to needed funds, the practice has drawn lawmaker scrutiny, especially around the issue of fees. In 2010, federal regulators began requiring banks to obtain cardholder consent before enabling overdrafts on most ATM and debit card transactions. Some banks voluntarily eliminated fees for small overdrafts, and some cap the number of fees charged in a single day.
The CFPB’s latest report, however, “raises concerns that despite these recent changes, a small number of consumers are paying large amounts for overdraft,” the agency said. While overdrafts accounted for more than half the fee income from consumer checking accounts held by banks in the study, the majority of these fees were generated by only 8 percent of accounts. There is industry speculation that the study is laying the groundwork for additional regulation around checking account overdrafts.
Overdrafts relating to prepaid products were not part of this study, but the CFPB has said prepaid overdrafts are among the main issues it is considering as it formulates its proposed prepaid rules, set to be released later this summer.
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