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In two separate moves, the Consumer Financial Protection Bureau (CFPB) is seeking data from 20 financial institutions on their overdraft fees and is asking consumers whether they can obtain timely information about their accounts from large banks.
Last week, the CFPB announced that the agency is weighing the impact of bank overdraft programmes on consumers. It has also since the start of the year been gathering data from 20 institutions based on five key consumer-impact metrics.
These include the total annual dollar amount consumers receive in overdraft coverage compared with the amount of fees charged and the prevalence of frequent overdrafters.
In addition, the agency’s supervision team is seeking detailed information about entities’ overdraft practices, including how they assess their fees, their grace periods, the dollar thresholds above which fees are assessed and caps on the number of fees charged per day or per statement period.
Last December, the CFPB found that overdraft and non-sufficient funds (NSF) revenue constitutes a large portion of banks’ revenue, with these fees reaching an estimated $15.5bn in 2019.
Previous research had also shown a large concentration in terms of consumers that frequently pay overdraft fees and banks that make the most revenue out of these fees.
In particular, less than 9 percent of consumer accounts accounted for close to 80 percent of all overdraft revenue, and 80 percent of the fees earned by large banks were paid to 20 institutions.
These included Wells Fargo, JP Morgan Chase, Bank of America, TD Bank and Santander.
At the time, CFPB director Rohit Chopra warned that financial institutions with a higher share of frequent overdrafts should expect close supervisory attention.
Since then, several large banks announced changes to their policies regarding overdraft fees, including Bank of America, Wells Fargo, U.S. Bank, Truist and Citigroup.
The CFPB said it is “encouraged” by these efforts but it “will evaluate how these changes are implemented” and “[m]any banks have yet to improve their practices”.
Account information
This inquiry, however, was not the only one that could cause headaches for large banks last week.
The CFPB published a request for information (RFI) seeking public input related to relationship banking and how consumers can assert the right to obtain timely responses to requests for information about their accounts from banks and credit unions with more than $10bn in assets.
The document notes that market concentration has increased significantly in the financial services sector, which may have led to the closure of local banks in rural communities.
In an April analysis, the CFPB found that “trends in banking consolidation may be a contributing factor to the prevalence of rural banking deserts”.
The RFI, therefore, raises that some of the largest banks “may not be offering the baseline level of customer service that consumers reasonably expect to receive from companies that have control over their money”.
The CFPB is now asking the public to submit stories and data around a number of questions, such as what types of information consumers request from their depository institutions and how long they typically need to wait for a response.
