ICBA urged the Consumer Financial Protection Bureau to withdraw its proposed rule to apply Regulation Z lending requirements to overdraft services.
ICBA Comments: In a comment letter, ICBA said:
It opposes the CFPB proposal, regardless of its exemption for community banks under $10 billion.
While the proposal would apply to banks over $10 billion, the CFPB proposed monitoring the market to determine whether to alter the regulations for banks under $10 billion.
The proposal would harm consumers who rely on overdraft services and fails to appreciate data showing consumers intentionally seek overdraft protection.
Applying Reg Z lending requirements to overdrafts conflicts with the regulation’s position that overdrafts are not extensions of credit, which is based on the Truth in Lending Act’s statutory definition.
Proposal Details: Under the CFPB’s proposed rule, banks over $10 billion in assets would have three options:
Extend overdraft services by treating them as extensions of credit and complying with federal lending laws, including disclosing any applicable interest rate.
Charge the amount that would allow them to break even on the cost of providing the overdraft.
Charge a fee at an established benchmark, proposed to range from $3 to $14 depending on how the CFPB assesses industry data on overdraft costs.
