ICBA urges CFPB to withdraw overdraft proposal

ICBA urged the Consumer Financial Protection Bureau to withdraw its proposed rule to apply Regulation Z lending requirements to overdraft services.

ICBA Comments: In a comment letter, ICBA said:

• It opposes the CFPB proposal, regardless of its exemption for community banks under $10 billion.

• While the proposal would apply to banks over $10 billion, the CFPB proposed monitoring the market to determine whether to alter the regulations for banks under $10 billion.

• The proposal would harm consumers who rely on overdraft services and fails to appreciate data showing consumers intentionally seek overdraft protection.

• Applying Reg Z lending requirements to overdrafts conflicts with the regulation’s position that overdrafts are not extensions of credit, which is based on the Truth in Lending Act’s statutory definition.

Proposal Details: Under the CFPB’s proposed rule, banks over $10 billion in assets would have three options:

• Extend overdraft services by treating them as extensions of credit and complying with federal lending laws, including disclosing any applicable interest rate.

• Charge the amount that would allow them to break even on the cost of providing the overdraft.

• Charge a fee at an established benchmark, proposed to range from $3 to $14 depending on how the CFPB assesses industry data on overdraft costs.