The Consumer Financial Protection Bureau (CFPB) announced that is reviewing the Federal Reserve's overdraft protection rule to find out if it “should be amended or rescinded” to minimize “any significant economic impact” to small businesses (SMBs) and credit unions. The 2009 rule requires that financial institutions (FIs) allow consumers to “opt in” to overdraft services for a fee. It also stops banks from charging overdraft fees on ATM and one-time debit card transactions without consumer consent.
During congressional hearings in April, five out of six of large-bank CEOs came out in support of legislation to limit how much banks can collect from overdraft fees, as well as ban the reordering of transactions, which can maximize the amount of the fees, according to American Banker.
Yet, as some large banks are no longer reordering, many small and mid-sized banks still rely on overdraft fees for as much as 50 percent of their revenue. A 2013 study by the CFPB found that the overdraft protection rule "led to a material decrease in the amount of overdraft fees paid by consumers."
"Since the issuance of the Overdraft Rule, the [CFPB] has observed several changes in overdraft practices at a number of financial institutions. These include: (i) changes in the order in which different categories of transactions are posted, which has resulted in a diminution in the number of overdraft transactions; (ii) limits on the number of overdraft fees that some financial institutions may charge in a single business day; and (iii) 'cushions,' which preclude assessing overdraft fees on de minimis amounts. The [CFPB] does not have reason to believe that these changes are attributable to the Rule," according to the agency.
The CFPB review is taking place under the 1980 Regulatory Flexibility Act, and companies will have 45 days to turn in their comments. The agency also said it plans to periodically review all CFPB rules issued within 10 years to determine the affect on SMBs, and if the rules “are consistent with the stated objectives of applicable statutes.”