As the August 15th deadline nears for bank and credit union customers to opt in to high-cost overdraft programs, a new CRL analysis finds these firms market most aggressively and often misleadingly to their most vulnerable customers. Banks target these customers because they likely live on the edge financially and therefore are most likely to repeatedly overdraw accounts. To induce these customers to accept overdraft coverage, many marketing campaigns use scare tactics or incomplete information. For example, they fail to emphasize customers can have debit card transactions declined at no cost rather than incur a $34 overdraft fee. [For the full report, go to http://qa.crl.w.lmdagency.net/research-publication/banks-target-mislead-consumers-overdraft-deadline-nears.]
CRL's report includes:
- Bank consultant pitches on pinpointing customers who will overdraft most.
- Evidence these customers are likely to be low-income, single, nonwhite.
- A cost comparison of overdraft programs.
Under new federal rules, banks must obtain explicit consent from existing customers by the 15th before enrolling them in a costly overdraft program for debit cards. Banks have had to obtain consent from new customers since July 1. These opt-in rules provide a first-line defense against high-cost overdraft fees, but the Federal Reserve Board and, eventually, the new Consumer Financial Protection Bureau must end all unfair overdraft practices, especially those that disproportionately hurt the most vulnerable.
For more information: Kathleen Day at (202) 349-1871 or kathleen.day@responsiblelending.org; Ginna Green at (510) 379-5513 or ginna.green@responsiblelending.org; or Charlene Crowell at (919) 313-8523 or charlene.crowell@responsiblelending.org.