Removing Barriers Blog

CFPB Releases Overdraft Disclosure Prototype After Limited Research

Early this morning, the Consumer Financial Protection Bureau released a prototype for “Know Before You Owe” overdraft disclosure prototypes following an agency report that included research on only the nation’s largest banks.   

Consumers remain highly satisfied with overdraft products, as indicated by the low number of consumer complaints even reflected in the CFPB's own data about overdraft. Credit unions provide these services as a courtesy and convenience to members.  

The CFPB conducted an overdraft study of only the largest banks, yet makes assumptions about a service that consumers at not-for-profit, member owned credit unions continue to seek as an option.   

A July 2015 CUNA survey found the following: 

  • Members enjoy the security and peace-of-mind of knowing a transaction will go through. This is evident by the fact that over half of all credit union members currently have overdraft protection active on their accounts. 

  • Chronic use of/reliance on overdraft protection by members is virtually non-existent. Of the roughly one-third of all members that have ever actually used overdraft, only 2% report using it once a month or more over the preceding year. (This 2% represents just .6% of all credit union members.)  

  • For members who have overdraft protection available, as well as members that have actually utilized overdraft, nearly three-quarters support charging a fee for using the service.  

  • Survey participants that have used overdraft indicated that if it was not available from their credit union, they would turn to other alternative money sources, such as payday or car title loans.  

  • 72% of all credit union members and 63% who have used overdraft in the last year prefer to have consumers “make their own choices about overdraft protection and continue to have options available without new federal government restrictions.” 

Once again, the CFPB seems to not understand that creating broad sweeping policy from one-size-fits-all analysis of the largest Wall Street banks is a disservice to America’s credit unions and the millions of members that rely on them for free checking, and the many other high-quality products and services they provide. 

CUNA will continue to urge the CFPB to work to better understand overdraft protection services.