CFPB Increases Regulation on Bank Overdraft Fees

On December 1, 2021, the Consumer Finance Protection Bureau (CFPB) issued a news release asserting banks’ “deep dependence” on utilizing overdraft fees dating back to 2015.

Research from two reports, Data Point: Overdraft/NSF Fee Reliance Since 2015 – Evidence from Bank Call Reports and Data Point: Checking Account Overdraft at Financial Institutions Served by Core Processors, found that in 2019, revenue produced by overdraft and non-sufficient funds was approximately $15.47 billion— almost two-thirds of the market's overall reported fee revenue. Although smaller institutions reportedly charged lower fees, on average, there was still a significant impact on consumers stemming from overdraft fees.

Following the CFPB's news release, two large banks—Capital One and Ally—released official statements notifying consumers that they will be eliminating overdraft fees for consumer accounts. According to Richard Fairbank, Capital One’s Founder and CEO, this is just “another step in our effort to bring ingenuity, simplicity and humanity to banking.”

According to a statement by CFPB Director Rohit Chopra, although many in the financial industry are “anticipating that other large banks will also call it quits” on the issuance of overdraft fees, the “CFPB is not holding out hope that this will happen quickly.”

Chopra’s opinion that action should be taken to “restore meaningful competition to [the financial] market” appears to be in accordance with the CFPB as their release provides the CFPB “will be enhancing its supervisory and enforcement scrutiny of banks that are heavily dependent on overdraft fees.”  As such, banks of all sizes should be aware of this policy shift and should consider the impact that this could have on your institution.

For questions or concerns about how this release could impact you, please contact Kennedy Sutherland.