WASHINGTON (5/13/15)--A recent report from the Pew Charitable Trusts reveals best practices credit unions can look to when crafting their overdraft service policies.

The report, which studied the practices of 45 of the 50 largest U.S. banks, found that while the Consumer Financial Protection Bureau (CFPB) has mandated that banks require consumers to opt-in to overdraft protection, the majority of those hit with fines don’t ever remember giving consent.

This signals that banks aren’t being transparent enough about the fees they charge their customers, Pew said.

“Customers need the CFPB to set clear standards that bring safety and consistency to this market and help consumers to make informed choices,” said Susan Weinstock, Pew consumer banking project director.

In the report, Pew defines best practices for overdraft services as clearly disclosed terms that:

• Provide checking accountholders with clear and concise disclosure about fees and terms;
   
• Reduce the incidence of overdrafts and eliminate practices that maximize overdraft fees; and
   
• Allow consumers to choose the method by which they resolve a problem with their financial institution, rather than asking for pre-dispute binding arbitration.

The policy recommendations to the CFPB that Pew formed based on the research include requiring financial institutions to:

• Summarize key information about terms and fees in a concise, uniform format;
   
• Provide accountholders with clear, comprehensive terms and pricing information for all available overdraft options;
   
• Make overdraft penalties reasonable and proportional to the financial institution’s costs to provide an overdraft loan;
   
• Post deposits and withdrawals in a fully disclosed, objective, and neutral manner that doesn’t aim to maximize overdraft penalties; and
   
• Prohibit pre-dispute mandatory binding arbitration clauses in checking account agreements, an act that will prevent accountholders from accessing courts to challenge unfair and deceptive practices.