The banking industry is gearing up to fight back with a multimillion-dollar marketing and lobbying campaign. While banks have drastically cut back on overdraft fees in the past decade, the nation's biggest banks still take in roughly
“It's just taking advantage of people,” President
Banks charge a customer an overdraft fee if their bank account balance falls below zero. Overdraft started off as a courtesy offered to some customers, but the popularity of debit cards beginning in the 1990s led to Americans wracking up tens of billions of dollars in overdraft fees.
Caving to popular and political pressure, most of the biggest banks have added safeguards to customers’ accounts to allow them to bring the balance back into positive territory before they incur a fee, which at some banks can be as high as
The largest banks have also curtailed their collection of fees for non-sufficient funds. In that case, the bank charges a customer a fee for not having the funds to cover a charge but also denies the transaction. These are commonly known as “bounced check fees.”
According to
Banking industry sources and consumer advocates both expect the CPFB's regulations to be focused on when overdrafts can be charged on a customer's account and how much banks can charge relative to the amount of risk a bank is taking on to cover a routine purchase. One criticism of overdraft fee practices is that the cost to a bank to cover routine purchases is low and banks have safeguards in place to stop customers from taking their accounts deep into red.
A report put out last month by the
“That is increasingly difficult for banks to justify. Particularly at the level of fees that are being charged," said
While big banks have cut back on overdraft fees, smaller banks have not, and a number of them heavily rely on overdrafts to be profitable, industry analysts said.
“There are still a large number of small banks and many credit unions that have not changed their credit policies, including a handful who have become addicted to overdraft,” said
““When you see an entity like
CFPB Director
“(The bureau) has been focused on creating more competition, which is helping to eliminate junk fees and stop financial firms from cooking up new junk fees,” Chopra told journalists in October in prepared remarks.
The industry is unlikely to convince Chopra to hold off on the overdraft rules, and instead hopes to delay the bureau long enough to have any regulation overturned by a
The law was used in the early months of the
“We urge you not to proceed with these rulemakings until the Bureau assesses the economic impact of its rulemakings on community banks and credit unions, as the Bureau is required to do so,” the
The banking lobby is also trying to be as vocal as possible in their opposition to prepare for an almost certain legal challenge to whatever rules the
"The
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