Overdraft Protection Requirements

ICBA’s Regulatory Outlook for 2013

By Elizabeth Eurgubian

Following extensive activity related to overdraft protection by the prudential bank regulators in recent years, the CFPB has taken up the issue and is expected to continue releasing regulations in 2013.

In 2011, the FDIC published final guidance on overdraft services while the Office of the Comptroller of the Currency proposed its own supervisory guidance on deposit-related consumer credit products, including automated overdraft protection and direct deposit advance programs. The OCC’s proposed guidance details the principles national banks should follow in connection with such products to address potential risks.

ICBA urged the agency to table the proposed guidance to allow the CFPB to examine the need for such requirements before any further agency action is taken. As of now, the OCC’s proposed guidance has not been finalized, but the CFPB is examining the current overdraft protection requirements.

In early 2012, the CFPB proposed for public comment a request for information on the impact of overdraft programs on consumers. The bureau said that it is reviewing existing regulations and supervisory guidance issued by various regulators pertaining to the use of overdraft programs by financial institutions. To support this extensive review, the CFPB asked for information regarding overdraft programs and their costs, benefits and risks to consumers.

To best enable the CFPB to understand overdraft protection services and the ways in which community banks provide this service to consumers, ICBA conducted and released the ICBA Overdraft Payment Services Study. ICBA communicated many of the study’s key findings to the CFPB, including data that showed community banks responsibly provide overdraft services to their customers and that customers are pleased with having the service available to them.

The CFPB is examining this issue and may propose agency guidance or regulatory amendments on overdraft protection services in the coming year. Stay tuned. endmark

Elizabeth Eurgubian is ICBA vice president and regulatory counsel.