Consumer Finance Watchdog Stalls on Overdraft Fees

Last year, the Consumer Financial Protection Bureau began exploring whether it needed to further tighten regulation of overdraft fees after the Federal Reserve revised the rules in 2010. Now the new financial industry watchdog appears to be taking a go-slow approach after pushback from small lenders that rely on the revenue far more than major commercial banks. In a Feb. 5 conference call with credit unions, CFPB Director Richard Cordray noted that the bureau “got an earful from a number of you and many others on the issue of overdraft” when it began seeking public comment a year ago.

Revenue from overdraft fees represents 3 percent to 15 percent of total revenue for smaller lenders, according to Camden Fine, president of the Independent Community Bankers of America. In contrast, at Wells Fargo, overdraft and other fees brought in $4.3 billion in 2011—just 1 percent of the bank’s net revenue, financial disclosures show. “The gross dollars go to megabanks, but those are a tiny percentage of their balance sheet,” says Fine. “There are more than a few community banks that would really be hurt by restrictive regulation.”