On December 8, 2021, the Acting Comptroller of the Currency, Michael J. Hsu, made remarks in front of the Consumer Federation of America’s 34e Annual Financial Services Conference where he voiced pressure from the Office of the Comptroller of the Currency (OCC) for overdraft reform to benefit financially vulnerable consumers.
Hsu believed that many banking services are often not structured to improve the financial health of low-income consumers. Hsu said that one of the main causes of this problem is the “traditional bank overdraft programs”. However, Hsu pointed out that the complete elimination of overdraft programs can also hurt these consumers, as many rely on them to “pay their bills on time, avoid expensive alternatives, and improve their credit profile.”
Hsu urged banks to consider using “financial health” as a measure to assess whether they have responsible banking products and services to meet “the ability of individuals and families to meet their daily obligations and needs. , absorb and recover from financial shocks and pursue long-term savings goals. The OCC has identified several characteristics of bank overdraft programs that could be tailored to better support “financial health”. These features include banks:
- “Requiring consumer membership in the overdraft program”
- “Grant a grace period before charging overdraft fees”
- “Allow negative balances without triggering overdraft fees”
- “Provide consumers with balance alerts”
- “Provide consumers with access to real-time balance information”
- “Link a consumer’s current account to another account for overdraft protection”
- “Collect overdraft or NSF charges on a consumer’s next deposit only after other items have been posted or cleared” and
- “Do not charge separate and multiple overdraft fees for multiple items in a single day and do not charge additional fees an item is re-submitted.”
Hsu also urged all banks to adopt an approach that “defines[s] a basic standard for safe, affordable and appropriate accounts that meet the needs of low-income consumers ”with the goal of reducing the unbanked population and eliminating overdraft fees.
Hsu said that “[b]anking deposit account services should be structured to improve the financial capabilities of clients and have a low or free price. According to Hsu, several banks have already started reforming their overdraft programs. Hsu believes that this “race to the top for the most consumer-friendly overdraft program could help make being poor less expensive and show consumers that the banking system supports them.” As this race to the top is not enough, Hsu promised that “[n]The new rules and the credible threat of enforcement action for harmful practices should help ensure that at least some progress [be] in the future, notwithstanding banking reform efforts.