The CFPB’s New Regulations
The Consumer Financial Protection Bureau (CFPB) has announced new regulations that will target overdraft programs and the fees associated with them. The CFPB’s last action regulating overdraft services was in 2010, when it began requiring banks to get written authorization before enrolling customers in overdraft programs.
In 2015, the CFPB fined Regions Financial Corp. $7.5 million under Regulation E. Regions was required to refund $50 million in fees to customers who had not opted in for overdraft coverage. Banks should take notice of the CFPB’s actions: TCF Financial Corp. has also been notified that its overdraft opt-in practices are under scrutiny, and warned of possible action against them.
How Banks Are Adjusting
In anticipation of these changes, some banks have already begun adapting by offering new products. Some of these include checking accounts without overdraft protection, or accounts for which the fees are assessed differently. Capital One introduced a new product called 360 Checking, which does allow overdrafts, but charges interest only on the amount of the overdraft. Similarly, KeyBank rolled out a product geared toward the unbanked, called the Hassle-Free Account. This type of account allows consumers to make deposits and withdrawals, track their funds, and make payments without incurring overdrafts.
The CFPB will be considering other changes with standard checking accounts. Beyond overdraft and insufficient funds fees, the CFPB’s initiative will include changing the order banks post account transactions, as well as new opt-in rules for debit card overdraft. CFPB Director Richard Cordray says that changes can be expected later this year.
The CPAs at Condley and Company, L.L.P. would be happy to speak with you about any of your accounting needs. Please reach out to us at (325) 677-6251 for a consultation. For more information on this topic, please refer to this article from Bank Director.