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CFPB Under Pressure to Rein in Overdraft Programs
Tuesday, December 27, 2016 6:50 AM

The Consumer Financial Protection Bureau is facing renewed pressure by consumer groups and think tanks to move forward with a plan that would rein in overdraft programs. The latest salvo came last week when the Pew Charitable Trusts released a study that found overdraft programs remain an expensive source of credit and need significant reform.

"What began as an occasional courtesy has now become a frequent and harmful practice throughout our banking system," said Nick Bourke, director of consumer finance at Pew.

Whether the CFPB will have the chance to move forward with a proposal remains unclear. The agency recently listed overdraft as part of its "pre-rulemaking" agenda, and it has released its own studies suggesting that consumers are paying too much in overdraft fees. But with President-elect Donald Trump due to take the White House next month, the agency appears likely to find itself under attack from every branch of government, perhaps curbing its ambitions.

Overdraft revenue continues to be a significant source of non-interest income for credit unions and is rising at a faster pace than at other types of financial institution, hitting its highest level ever during the third quarter of 2016.

According to Mike Moebs, economist and CEO at Moebs $ervices in Lake Forest, Ill., overdraft revenue has risen by 1.2 percent since 2015, and while banks and thrifts have only seen a slight increase, CUs lead the pack with a 3.4 percent increase. As of Q3, credit unions have brought in $6.1 billion in overdraft revenue, compared to $26.8 billion for banks and thrifts. In the last five years, overdraft revenue at banks and thrifts has risen by 2.29 percent (from $26.2 billion in 2011 to $26.8 billion today), compared to nearly 13 percent for credit unions (from $5.4 billion to $6.1 billion).

Read more at the source: Credit Union Journal