Banking customers are being “surprised” by unexpected fees for overdrafts, according to the Consumer Financial Protection Bureau (CFPB).
The bureau released a report just before Christmas highlighting persistent issues with unexpected overdraft and nonsufficient fund (NSF) fees faced by consumers, despite recent industry changes.
However, the American Bankers Association (ABA) has argued that the CFPB’s report ignores other factors, including clear disclosure of fees by the majority of banks and other surveys that have found high levels of customer satisfaction.
The CFPB’s ‘Making Ends Meet’ survey revealed that over a quarter of respondents had a household member charged overdraft or NSF fees in the past year, with only 22% anticipating their most recent overdraft. Many faced overdraft fees despite having access to cheaper credit alternatives, such as credit cards.
CFPB director Rohit Chopra emphasized the unexpected financial burden on families and what the bureau felt was a prevalence of fees even when affordable credit options were available. The report found that households frequently incurring these fees were more likely to struggle with financial obligations, with 81% reporting difficulty paying bills.
The bureau’s report found that 43% of consumers charged an overdraft fee were caught off guard, indicating a lack of transparency in fee expectations. The report also revealed that low-income households were disproportionately affected, with three times as many making less than $65,000 facing overdraft or NSF fees, compared to 10% of those with over $175,000 in income.
However, the ABA’s CEO Rob Nichols highlighted that the CFPB’s own report explained that overdraft fees and NSF fees had been eliminated by many large banks and credit unions.
In a statement reported by the ABA’s Banking Journal, Nichols said the CFPB’s survey should have explored the value that customers place on overdraft protection. He cited research published by the ABA and Morning Consult from October 2023 that showed 88% of bank customers “found their bank’s overdraft protection valuable”.