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CBA supports strong and effective consumer protections and, specifically, we support the principles of customer choice, transparency, and fairness in deposit account relationships. Recently-enacted federal regulation has afforded consumers greater protection via detailed disclosures and, absent substantial evidence that this regulation is failing or falling short of its intended purpose, we submit further incremental changes to the rules governing overdraft protection will only add logistical complexity and increased customer confusion without corresponding benefits.

In 2010, a set of overdraft protection rules, issued by the Federal Reserve Board, became effective. These rules, issued under Regulation E (Electronic Funds Transfer Act), generally prohibit financial institutions from assessing fees for paying ATM and one-time debit card transactions that overdraw consumer accounts unless the consumer affirmatively consents, or “opts-in,” to the overdraft protection program. In addition, the banking regulators issued guidance in 2005 that provides assistance to financial institutions with regard to the responsible marketing, disclosure, and administration of overdraft protection services. This guidance is intended to ensure financial institutions adopt adequate policies and procedures to address the credit, operational, and other risks associated with overdraft protection services; alert institutions offering these services of the need to comply with all applicable federal and state laws; and provide examples of best practices currently used or recommended by the industry.

Since then, the FDIC has issued final guidance on overdraft payment programs that applies to state-chartered banks, and the Office of the Comptroller of the Currency proposed supervisory guidance for safe and sound practices for national banks in connection with deposit-related consumer credit products (overdraft protection). The CFPB has recently announced several initiatives to deal with overdraft practices by banks, including a review of bank practices, a request for comments, and a prototype fee disclosure form on which comments are requested.

CBA contends the FRB rules issued last year addresses most, if not all, of the issues surrounding overdraft protection services. We also believe that coordination among the federal banking regulators will lead to more regulatory certainty, from which all parties concerned would benefit.

Press Release: CBA Releases Data Finding Overdraft Opt-In Rates at 16% (October 27, 2011)

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