August 04, 2017

CFPB unveils overdraft disclosure prototypes; no rulemaking for now

The CFPB on Friday released new overdraft disclosure prototypes meant to improve those used by financial institutions – including credit unions – in order to help consumers better understand the risks and costs of opting into overdraft coverage.

"NAFCU strongly supports opt-in forms being clear and concise. We are not aware of current forms being problematic and believe consumers make informed decisions," said NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt. "Consumers value having choices when it comes to financial products and services, and having the ability to opt into a service with a safe and accredited institution helps them cover their expenses in a convenient way. Credit unions actively provide different services to fit the daily needs of their membership, whether it be small-dollar loans, overdraft protection services, or other account services."

The CFPB released four one-page prototype model forms that are now being tested more widely. In prepared remarks, CFPB Director Richard Cordray said the bureau is not proposing any regulatory amendments on this issue, but is considering new overdraft regulations. He said the CFPB is in the "pre-rule stage," with "no timing stated for when a rule may be proposed."

Along with the overdraft disclosure prototypes, the CFPB last week also released a report on the topic, which found that those who opt into overdraft coverage typically pay substantially more in overdraft fees. The study is based on data from several large banks that the CFPB said account for more than 40 million consumer checking accounts.