The Consumer Financial Protection Bureau (CFPB) recently released its Overdraft and Nonsufficient Fund Fees survey, shedding light on the financial landscape of consumer households. The survey delves into a range of takeaways. With an in-depth analysis of consumer behaviors and the practices of financial institutions, we navigate through the complexities of the report to uncover its significant implications and explore what it means for the future of banking and consumer financial protection.
The CFPB’s release of Overdraft and Nonsufficient Fund Fees: Insights from the Making Ends Meet Survey and Consumer Credit Panel came the week before Christmas 2023. The report restates earlier conclusions that roughly a quarter of consumer households were charged an overdraft or NSF fee in the past year. The survey asked consumers if they were “surprised” about their most recent overdraft or NSF fee and found that consumers who were charged more fees were less likely to be surprised than consumers who infrequently overdrew their accounts.
The CFPB analysis data came from 2,136 consumers who received a CFPB Making Ends Meet survey. The research questions included:
The report concludes that 26.5% of consumers were charged overdraft or NSF fees in the prior year. That means nearly three-quarters (73.5%) of the surveyed consumer households were not charged those fees. Of the consumers charged from 1-3 overdraft or NSF fees, 51% were surprised by the fee, while only 16% of consumers with 10 or more fees reported being surprised. This report does not comment that consumers could be surprised by fees resulting from a lack of transparency about overdraft handling in the CFPB-supervised financial institutions included in the survey.
In the analysis, the number of consumers declines as the number of overdraft fees increases, so 14.8% of consumers were charged 1-3 overdraft fees, 5.5% were charged 4-10 overdraft fees, and 3.2% were charged more than ten overdraft fees. This data is consistent with earlier CFPB analysis that stated, “Most overdraft fees are paid by a small fraction of bank customers: eight percent of customers incur nearly 75 percent of all overdraft fees.” The analysis also shows that overdraft and NSF fees occur more in economically disadvantaged households (35% of households with incomes between $35,001 and $65,000 versus only 18% of households with incomes between $100,001 and $175,000) and for consumers with lower average credit scores. Most consumers (81%) in the analysis with 10 or more overdraft and NSF fees also reported difficulty paying a bill at least once in the past year.
This report comments on the changes within CFPB-supervised financial institutions, stating that nearly two-thirds of banks and one-quarter of credit unions have eliminated NSF fees. Among the 20 banks that reported the most Overdraft/NSF revenue during 2021, the report states that seven have reduced or eliminated overdraft fees in the most recent year. It is unlikely that the consumers included in the survey have experience with a fully transparent, disclosed overdraft solution. Most CFPB-supervised financial institutions do not disclose a fixed overdraft limit, so consumers are less likely to have confidence that an overdraft will be paid.
In summary, the CFPB’s report provides a critical lens through which we can view the current state of consumer banking practices, particularly in relation to overdraft and NSF fees. While it highlights the complexity of managing a successful overdraft service, it’s evident that there is a need for greater transparency and consumer education. As we continue to monitor the evolving regulatory environment, one constant remains—there is a strong emphasis on prioritizing transparency, fairness, and consumer well-being.
 “Overdraft and Nonsufficient Fund Fees: Insights from the Making Ends Meet Survey and Consumer Credit Panel,” Consumer Financial Protection Bureau, December 19, 2023.
For more about overdraft compliance, check out our recorded webinar, “Overdraft Year in Review: Navigating Regulatory Expectations in 2024.”
If you have questions or want to learn more about a consumer-first overdraft strategy or how to receive a complimentary evaluation, contact your local representative.
Cheryl Lawson has more than 30 years of experience in information technology and financial operations, as well as consulting, communications, training, and project management. She serves as ADVANTAGE’s principal compliance liaison for regulatory requirements of overdraft services, including consumer protection issues and strategies that enhance safety and soundness.