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Conversations Continue on Overdraft Strategies; Consumer Protection Remains a Consistent Theme
Thursday, April 4, 2013 5:10 AM

While the Consumer Financial Protection Bureau (CFPB) continues to review the information it received from financial institutions and consumers regarding how overdraft programs impact account holders and smaller financial institutions, efforts to thwart programs which utilize practices that are harmful to consumers continue.

In March, legislation was re-introduced in Congress which would cap overdraft fees, impose a limit on the number of overdrafts that a member could incur per year, and ban the practice of manipulating the posting order of account holder transactions.

On the legal front, a Florida judge recently approved a $62 million settlement against TD Bank resulting from a multi-district lawsuit by customers alleging the bank re-ordered debit card transactions to generate maximum overdraft fees.

According to John M. Floyd & Associates, (JMFA) transparency and full disclosure are essential for effective consumer financial products.

As regulators, lawmakers and consumer advocates continue to push for more transparent, user-friendly financial products, Cheryl Lawson, executive vice president of compliance with JMFA, says it is incumbent upon financial institutions to make the necessary adjustments in their product offerings and procedures to remain compliant and competitive.

In their efforts to reinforce the important role of overdraft services, JMFA says they have provided the CFPB with recommendations – based on feedback received from their clients – that seek balance in overdraft regulations, based on the following:

  • Full disclosure – account holders should be provided with clear and conspicuous information as to the terms of the services that they are receiving;
  • Consumer choice – account holders should have a choice as to whether or not to receive overdraft services;
  • Fair practices – financial institution practices should not artificially inflate or manipulate account holder costs;
  • Fair regulation – regulation should not artificially increase account holder costs or make it difficult for them to obtain services; and
  • Fair and transparent markets – where overdraft services compete with other services, the regulatory scheme for overdraft services should not encourage consumers to use less-regulated providers of financial services.

“We believe that the information we shared with the Bureau – regarding the value of overdraft programs for consumers – will play an important role as it continues to study this matter,” said JMFA Chairman/CEO John M. Floyd. “The feedback we received reinforces the important human aspect of overdraft services – it’s not just a back-office procedure, rather a valuable service that benefits consumers, whether they incur overdrafts only occasionally or on a more regular basis.”

JMFA is a preferred business alliance of Credit Union Resources, Inc.