U.S. consumer watchdog says it will scrutinize banks' 'blockbuster' overdraft fees - Metro US

U.S. consumer watchdog says it will scrutinize banks’ ‘blockbuster’ overdraft fees

FILE PHOTO: The logo and ticker for Capital One are displayed on a screen on the floor of the NYSE in New York

By Katanga Johnson

(Reuters) -The U.S. Consumer Financial Protection Bureau (CFPB) will issue new guidance aimed at curbing banks’ reliance on fees from overdraft and non-sufficient funds (NSF) facilities that lenders impose on consumers, its top official said on Wednesday.

Rohit Chopra added that he has also tasked the regulator’s bank examiners with prioritizing lenders that over-rely on such fees, of which banks netted $69 billion in the third quarter.

The agency also hopes that impending data-sharing rule changes aimed at boosting competition among lenders will make it easier for consumers to dump banks that overcharge them.

“The (consumer watchdog) is considering a range of regulatory interventions to help restore meaningful competition in this part of the checking market, rather than allowing large institutions to rely on overdraft and non-sufficient revenue fees forever,” Chopra said.

Chopra pointed out that a “blockbuster” third quarter far outstripped the $15 billion netted in 2019.

Also on Wednesday, Capital One Financial said it would eliminate all overdraft and NSF fees for consumers, ending a practice that drew the ire of U.S. lawmakers at a Senate hearing earlier this year.

Customers will have to choose if they want to opt for the free overdraft protection service, Chief Executive Officer Richard Fairbank said in a memo, and have to show a pattern of steady deposits to be eligible for it.

“Many in the market are anticipating that other large banks will also call it quits (on overdraft fees). The CFPB is not holding out hope that this will happen quickly,” Chopra added.

Industry groups criticized any potential move by the CFPB to introduce “stifling” rules that may hinder competition and innovation that benefit American consumers.

“Outside of overdraft, few options remain for consumers to meet their short-term liquidity needs within the well-regulated, well-supervised banking system,” said Richard Hunt, who leads the Washington-based Consumer Bankers Association.

(Additional reporting by Niket Nishant in Bengaluru, Elizabeth Dilts Marshall in New YorkEditing by Amy Caren Daniel)

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