Overdraft Programs & Overdraft Fees – CFPB’s Overdraft Program Study

“Consumer Voices on Overdraft Programs” – CFPB Overdraft Study – Key Findings

The CFPB reported that it launched a qualitative study to explore consumers’ thoughts, intentions, and expectations about overdraft programs to supplement its quantitative analyses of overdraft programs and their impacts on consumers. This qualitative study consisted of in-depth interviews with consumers who had experience with overdraft programs.

The CFPB’s report detailed the findings from consumer interviews, including how interviewed consumers understood overdraft programs, consumer perceptions of experiences with overdraft, and consumer beliefs about the advantages and drawbacks to alternatives to overdraft.

The CFPB reported the following key findings from consumer interviews:

Consumers in the study noted several benefits to the availability of overdraft as well as drawbacks. Despite recognizing some benefits, however, all participants were concerned about the high cost of overdraft fees.

Participants commonly reported surprise at the overdraft fees they were charged. At the same time, some participants expressed awareness that they risked overdraft fees when transacting. 

Participants expressed uncertainty about how their financial institutions make decisions about what to pay into overdraft or how they charge overdraft fees; participants were particularly uncertain about how their financial institution’s overdraft policies differed across types of transactions. 

Many participants’ overdraft experiences reflected uncertainty about transaction processing, such as the timing of deposits being credited to their accounts. Participants also commonly forgot about scheduled payments that resulted in overdrawn accounts. 

Participants frequently cited friends and family members as resources that could provide an alternative for them to overdraft. Their views on other financial products as alternatives to overdraft such as credit cards or savings diverged widely, with some participants viewing these alternatives as beneficial and others viewing alternatives as risky. 

CFPB’s Overdraft Study Highlights Importance of Providing Suggestions & Strategies To Support Consumers

The CFPB report stated that

. . . the range of experiences with overdraft described by consumers participating in the CFPB’s study highlights the importance of providing resources that reflect the diversity in how consumers use and understand overdraft programs. The wide range of preferences and experiences that consumers relayed through the interviews indicates that financial educators may best achieve their goals by designing flexible resources that adapt to individual consumers’ experiences and preferences. Below are some suggestions of strategies . . . to support consumers: 

**Remind consumers to consider a bank or credit union’s overdraft practices when selecting a checking account. 

**Encourage consumers to investigate all overdraft options offered for their current checking account, including linking an account, in order to select the plan that best fits their needs. 

**Help clients develop a system for staying aware of the timing of their scheduled payments. The CFPB’s Your Money Your Goals toolkit includes a spending tracker and a bill calendar that consumers can use to keep track of their cash flow. Those who are interested in the tools can order them for free at consumerfinance.gov/your-money-your-goals/.

**Encourage consumers to check account balances periodically by doing things such as calling their bank, visiting an ATM, signing up for text alerts, viewing accounts online, or using mobile applications before making discretionary purchases.

**Suggest that consumers sign up for low balance alerts to help them avoid unintentional overdraft.

CFPB Educational Resources and Tips for Consumers on Managing Checking Accounts, Including Information on Overdraft-Related Issues 

Guides to selecting and managing checking accounts, available at consumerfinance.gov/about-us/blog/guides-to-help-you-open-and-manage-your-checking-account/. 

A worksheet to support consumers in managing spending to achieve their financial goals at consumerfinance.gov/about-us/blog/managing-your-spending-achieve-your-goals/. 

Explanation of how overdraft programs differ for everyday debit card purchases and ATM withdrawals at consumerfinance.gov/about-us/blog/understanding-overdraft-opt-choice/.

Answers to consumer questions about overdraft and other issues relating to bank accounts and services as part of the Ask CFPB website at consumerfinance.gov/askcfpb.

The CFPB’s report, which shares findings from qualitative interviews the CFPB conducted with consumers about their experiences with overdraft programs, can be viewed by clicking CFPB’s Consumer Voices Report.

Kehoe Law Firm, P.C.