On December 8, 2021, the Acting Comptroller of the Currency, Michael J. Hsu, gave remarks before the Consumer Federation of America’s 34th Annual Financial Services Conference where he expressed the Office of the Comptroller of the Currency’s (OCC) push for bank overdraft reform to benefit financially vulnerable consumers.

Hsu opined that many banking services are often not structured to aid lower income consumers’ financial health.  Hsu stated that one of the main causes of this issue are “traditional bank overdraft programs.”  However, Hsu emphasized that the complete elimination of overdraft programs may also cause harm to these consumers because many rely on them to “pay their bills on time, avoid high-cost alternatives, and improve their credit profile.”

Hsu urged banks to consider using “financial health” as a measure to assess whether they have responsible banking services and products in order to address “the ability of individuals and families to meet their day-to-day obligations and needs, absorb and recover from financial shocks, and pursue long-term savings goals.”  The OCC has identified several product features of bank overdraft programs that could be adapted to better support “financial health.”  These features include banks:

  • “requiring consumer opt-in to the overdraft program”
  • “providing a grace period before charging an overdraft fee”
  • “allowing negative balances without triggering an overdraft fee”
  • “offering consumers balance-related alerts”
  • “providing consumers with access to real-time balance information”
  • “linking a consumer’s checking account to another account for overdraft protection”
  • “collecting overdraft or NSF fees from a consumer’s next deposit only after other items have ben posted or cleared” and
  • “not charging separate and multiple overdraft fees for multiple items in a single day and not charging additional fees an item is re-presented.”

Hsu also urged all banks to adopt an approach that “set[s] a baseline standard for safe, affordable, and appropriate accounts that meet the needs of low-income consumers” in an effort to reduce the unbanked population and eliminate overdraft fees.

Hsu stated that “[b]anking deposit account services need to be structured so that they improve customers’ financial capabilities and are priced to be low to no cost.”  According to Hsu, several banks have already begun to reform their overdraft programs.  Hsu believes that this “race to the top for the most pro-consumer overdraft program could help make it less expensive to be poor and demonstrate to consumers that the banking system has their backs.”  To the extent this race to the top is not enough, Hsu promised that “[n]ew rules and the credible threat of enforcement actions for harmful practices should help ensure that at least some progress will [be] made in the future, bank reform efforts notwithstanding.”

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