By: Joe Gillen
The Consumer Financial Protection Bureau is examining nine U.S. banks, including JP Morgan Chase, Wells Fargo and Bank of America, to determine if its inquiry into overdraft program compliance should go further.
The examination will primarily focus on the practices banks use to encourage consumers to take advantage of overdraft privilege programs. CFPB representatives will focus on marketing materials, both online and mailed, as well as customer service conversations surrounding the programs, according to Bloomberg. In addition, the CFPB will also explore the reasoning behind the amounts banks charge in overdraft fees, the news source explains.
The move has reignited discussions surrounding the tighter regulation of bank practices, which many industry analysts say will do more harm than good to the economy. Officials from several financial institutions have noted that overdraft services are products that are in demand with their customers, many of whom use the services as a safety net when they fall short on funds. In addition, bank professionals argue that because consumers are now required to opt-in to have their ATM and point-of-sale transactions covered, they have more control and authority over whether to utilize overdraft services.
Recent regulatory actions surrounding overdraft programs have shed more light on the utility of these services. Although many consumers use these programs as a safety net, regulators continue to revisit legislation that seeks to limit their scope and accessibility. Many consumers who want overdraft services are now turning to community banks and credit unions that tend to carry lower overdraft fees than megabanks.