Time's Running Out to Comment on the Impact of Overdraft Protection

June’s end also marks the end of the Consumer Financial Protection Bureau’s extended comment period on the impacts of overdraft programs on consumers. What’s CFPB’s end game here? Will ATMs and point-of-sale (POS) devices need to deliver a real-time “insufficient funds” warning to consumers before a transaction causing an overdraft takes place?

The CFPB’s notice for comment on overdraft is fairly sweeping in scope. Questions range from quantifying overdraft opt-in rates, the economics of overdraft programs and long-term impacts to consumers. Of particular concern to EFTA members are questions related to consumer alerts and balance information. EFTA membership hits all the touch points of a shared network transaction: the bank, the processor, the network switch, card processor and host processor. If the CFPB were ever to require some type of overdraft notification at an ATM or POS, EFTA members would be in ground zero for compliance.

But, let’s not get too ahead of ourselves here. EFTA will provide the CFPB with comments before the June 29 deadline. Though not finalized, EFTA will emphasize three main points in the comment letter:

·       Most POS devices at retail stores or gas pumps currently lack the ability to deliver any meaningful message to the consumer with respect to a possible overdraft occurrence

·       ATMs are a bit more sophisticated than POS terminals but, again, delivering an overdraft notice message in a shared network transactions (versus on us) is challenging

·       A greater burden will be placed on community and independent banks versus the larger institutions

Once the comment period closes on June 29, the CFPB will take several weeks (probably months) to read over and formulate a proposed rule on overdraft protection. At this writing, the CFPB has received more 235 comments (see them here at regulations.gov). EFTA’s final comment letter will be posted soon.