The news: US financial-services trade groups led by the American Bankers Association (ABA) asked the Consumer Financial Protection Bureau (CFPB) to pause its pending crackdown on overdraft fees, arguing that it could deprive consumers of an option to avoid falling behind on their personal expenses. In the meantime, they want the regulator to gather insights into frequent-overdraft users.
More on this: At stake is a revenue source that brought in $8.82 billion for banks during 2020, per S&P Global Market Intelligence.
The associations contend that restricting overdraft-related items will leave some people worse off because they will lose access to a solution that helps them manage their short-term liquidity—potentially leading to:
The groups also pointed to public opinion data in making their case, such as:
The trade organizations also pointed to measures that financial institutions are already taking to reduce consumers’ overdraft-fee exposure, such as 24-hour grace periods letting people eliminate their negative balances, early access to direct deposits, and being able to link their transaction accounts to outside sources of funds.
Anti-exposure measures have been recently added by a series of big incumbent banks, such as Wells Fargo, Bank of America, and JPMorgan Chase.
What do the associations want? They called on the CFPB to study consumers’ overdraft preferences and collect data, including:
The big takeaway: While the trade groups’ request that the CFPB gather insights on consumers’ motives and awareness is reasonable, legally curtailing overdraft fees won’t necessarily push people into trading one hardship for another.
A growing number of incumbents are already adding or proactively promoting alternative liquidity-assistance services, such as:
Consumers are not necessarily enthusiastic about overdraft fees, notwithstanding the question about whether they are reasonable.