CFPB review of overdraft should not bring add’l burdens

July 1, 2019

CUNA recommends the Consumer Financial Protection Bureau (CFPB) avoid creating unnecessary burdens or limitations on the availability of overdraft programs. CUNA made that recommendation in its comment letter on overdraft, and also highlighted the effects of other regulatory requirements on overdraft products.

“Credit unions would not support efforts to reopen or revise the 2009 Overdraft Rule to expand the rule’s scope or add additional compliance requirements on credit unions offering this popular product to their members,” the letter reads. “When considering the issue of overdraft protection, the CFPB should keep in mind the personal choice consumers make when they opt in to these services for the comfort of knowing a transaction, especially a necessary or emergency purchase, will be honored.”

The CFPB is conducting a review of its 2009 overdraft rule as required by the Regulatory Flexibility Act. Its purpose review is to determine whether the rule under review should be “continued without change or amended or rescinded to minimize any significant economic impact of the rules upon a substantial number of such small entities, consistent with the stated objectives of applicable statutes,” per the statute.

CUNA noted its strong support for fair lending practices and proper consumer disclosures and urged the CFPB to consider the numerous differences in credit unions and banks regarding overdraft protection programs.

“When used appropriately by members, overdraft protection programs serve as a lower-cost alternative to high-interest payday loans and are fully consistent with the philosophy and principles unique to the credit union system,” the letter reads. “Because of the member-focused structure, credit unions charge their members lower fees for overdraft services than banks that need to maximize profits for shareholders.”

CUNA also highlighted regulations that impact consumer access to overdraft services:

  • The Telephone Consumer Protection Act, which due to a July 2015 ruling from the Federal Communications Commission, is broad and vague, thereby hampering credit unions’ ability to effectively contact members with necessary information related to low balances; and
  • Regulation D, which limits account transfers. After the limit of six electronic withdrawals or transfers, a consumer’s savings account will no longer be available for further overdraft protection. While the CFPB does not have authority over Regulation D, CUNA called on the bureau to consult with the Federal Reserve and support efforts to eliminate or increase the Regulation D transfer limit.