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CFPB Puts Out Prototype Overdraft Disclosure Forms

Thu 07 Sep, 2017  /  by   /   Client Alerts

09/07/17 – Last month, the CFPB released new proposed overdraft disclosure forms to replace the form that banks and credit unions are required to provide to consumers when opting into an overdraft program.

The CFPB also published a report about consumers’ use of overdraft programs, focusing on consumers that frequently overdraw their checking accounts.

In 2010, federal regulations began requiring banks and other financial institutions to obtain a consumer’s consent in advance before charging overdraft fees on most debit card transactions and ATM withdrawals. Under this rule, financial institutions are also required to give consumers certain overdraft fee information using a certain prescribed model form.

The CFPB considering changes to the model form and has unveiled four testing prototypes of the model form. According to the CFPB, the proposed forms, available on the CFPB’s website, would help consumers understand the costs of opting in to an overdraft program and help consumers evaluate the risks and benefits of opting in.

In addition to the proposed forms, the CFPB published a report on consumers that attempt to overdraw their accounts more than 10 times in a 12-month period, whom the CFPB calls “frequent overdrafters.” In the report, the CFPB found that frequent overdrafters who have opted in to an overdraft program will pay overdraft fees 13 more times than frequent overdrafters who have not opted in. The CFPB also found that frequent overdrafters carry low daily account balances, have low or no credit scores, and use debit cards six times more often per month than a typical non-overdrafter.

CFPB Press Release; Prototype Forms; Report.