By: Joe Gillen
The debate surrounding overdraft program compliance reached a new level this week during the ABA's March Government Relations Summit, in which bank representatives had the opportunity to question Consumer Financial Protection Bureau's David Silberman, who is the agency's acting associate director for research, markets and regulation.
Many community banks spoke out against the CFPB's ongoing overdraft study, which is currently examining how banks are managing their programs and assigning fees to overdrawn accounts. Disagreeing with the CFPB's view of overdrafts and how they have a negative impact on the consumer, ABA chairman-elect Matthew Williams extended an invitation to Silberman, urging him to visit small banks to view how their overdraft policies actually work - and help customers. Williams, who is chairman and CEO of Gothenburg State Bank, suggested that if Silberman had first-hand knowledge of fair overdraft programs, he would see how beneficial they can be.
"We treat our customers with trust and respect, and our overdraft program is part of that trust and respect," Williams told Silberman. "Spend some time on the ground with a local banker."
Silberman responded by thanking Williams for his offer and noted the challenges faced by both banks and the CFPB in establishing protocols that would work effectively for banks of all shapes and sizes, the ABA Banking Journal Reports. He noted that while he understands the banking regulations were not a "one-size-fits-all" policy, there was more to address about how banks' current overdraft privilege programs worked. He also said that while overdraft policies can be considered a lifeline to consumers in some cases, the CFPB still intended to address bank policies and the order in which charges were being processed to curb potential abuses.
Several banking professionals have voiced their opposition toward the CFPB's inquiry into overdraft policies, noting that a great deal of information the regulatory agency is using to make its decisions is outdated, namely a 2008 FDIC study that reports low-income families are disproportionately impacted by overdraft programs.
The CFPB is also looking to require an overdraft "penalty fee" box on consumer checking account statements that would display the amount overdrawn and the fees levied, even though overdraft disclosures are already required under Regulation DD. Many in the banking industry are opposed to these practices, noting opt-in rules and disclosures are already in place. The issue, they say is that many consumers are not paying attention to those existing disclosures and bank statements.