The Consumer Financial Protection Bureau (CFPB) has a new goal: overdraft fees. In a December 1 press call, CFPB director Rohit Chopra targeted the use of overdraft fees in consumer banking, saying some banks are “hooked on unwanted operating charges that can quickly empty a family’s bank account “. The CFPB, he said, “is considering a series of regulatory interventions to help restore meaningful competition in this market.”
Chopra’s comments came after the CFPB published two research reports on the use of overdraft fees in the banking industry. The former said that in 2019 alone, overdraft fees and other insufficient funds generated more than $ 15 billion in revenue for consumer banks, large banks (those with assets over $ 10 million). dollars), collecting three-quarters of total reported income. Drawing on information gathered from 2015 to the present, the report also indicates that the use of overdraft fees has grown slowly but steadily across the board.
The second report provided industry-wide data on overdraft policies, practices and results, with a particular focus on banks and credit unions with assets below $ 10 billion. He found that although these small institutions generally charged lower fees, they generated an amount of revenue per account comparable to their larger counterparts.
Based on these findings, Chopra announced that his agency would “strengthen its review of banks heavily reliant on overdraft fees.” Specifically, CFPB plans to “take action” against institutions with illegal overdraft policies and “prioritize reviews” of banks that rely heavily on these fees, with the goal of creating transparency across the board. sector on the use of fees and to prevent what Chopra described. like a “race to the bottom”. Chopra also said the agency is keen to see how technology can help push the US banking industry into an era of “open banking infrastructure,” which would allow consumers to “vote with their feet” by easily switching banks and abandoning those that charge excessive fees. .
The CFPB’s announcement came the same day Capital One, America’s sixth-largest retail bank, announced it would eliminate overdraft fees for retail clients starting in the new year. Organizations like the National Consumer Law Center and the Consumer Federation America have welcomed the move, arguing that overdraft fees disproportionately affect a small number of vulnerable consumers. Chopra, for his part, said he was “not hopeful” that other big institutions would follow.
Based on CFPB reports and comments from Chopra, banks should expect increased attention from regulators and the media, especially if other banks decide to follow in Capital One’s footsteps. Additionally, CFPB’s new regulatory priority will likely help foster an environment in which FinTech companies, third-party applications and other industry disruptors continue to gain popularity and generate pressure for change in the industry. industry-wide.
 For a full transcript of Chopra’s comments, see Rohit Chopra, Director, Consumer Prot. Fin. Bureau, Prepared remarks by CFPB director Rohit Chopra on the call for open press (December 1, 2021), available at https://www.consumerfinance.gov/about-us/newsroom/prepared-remarks-cfpb-director-rohit-chopra-overdraft-press-call/.  See Prot. Consumer Fin. Bureau, Data Point: Overdraft / NSF Fee Reliance Since 2015 â Evidence from Bank Call Reports (Dec 2021). 2020 provided an exception to this general rule, as banks experienced declining overdraft / NSF fee income during the COVID-19 pandemic. Identifier. at 7 O’clock.  See Prot. Consumer Fin. Office, Data Point: Overdraft of current account in financial institutions served by main processors (Dec. 2021).  See Press Release, Capital One, Capital One eliminates overdraft fees for clients (December 1, 2021), https://www.capitalone.com/about/newsroom/eliminating-overdraft-fees/.