Hsu Pushes Back on Overdraft “Junk Fee” Label


Cheryl Lawson |

Improving fairness will achieve pro-consumer services

Acting Comptroller of the Currency Michael Hsu pushed back against President Joe Biden and CFPB Director Rohit Chopra’s labeling of overdraft fees as “junk fees,” saying that forcing banks to stop offering overdraft protection should not be the goal of regulators.

In his remarks at a Washington, D.C., economic conference, Hsu stated that rather than eliminate these programs and fees, banks should focus on updating their overdraft solution to make it more friendly to consumers and avoid regulatory risk.

APSN & re-presentment fee risk continues
Noting that “not all overdraft practices are equally risky,” Hsu went on to discuss two topics that JMFA has been covering for several years: Authorize Positive, Settle Negative (APSN) fees, and multiple re-presentment fees. Practices surrounding these two issues can create risk — but they can also be addressed with updated processes and clear disclosures.

Hsu mentioned a third potential risk with overdraft practices that we have also been advising our clients on: the lack of fee caps that may be assessed in a single day. Capping fees is a solution that is fairer for consumers and more indicative of a valuable service rather than an expensive penalty.

Consumers want access to overdraft protection
Despite these issues, Hsu maintained that overdraft protection is a service that consumers find both valuable and necessary.

“Many customers tell their banks, as well as groups that have studied overdraft practices, that this banking service helps them meet payments when they come due,” Hsu said. “What we are all trying to do is improve the fairness of these programs by making them more pro-consumer, not to eliminate them.”

His message is clear: a responsible, fair, transparent, and compliant overdraft service fee is quite different than a “junk fee.”

However, it’s essential to ensure that you offer a responsible, fair, transparent, and compliant overdraft program. And the sooner, the better.

“You don’t want to be the last bank to update your overdraft protection program,” Hsu cautioned.

(Note: As the Acting Comptroller of the Currency, Hsu holds a seat on the board of directors of the Federal Deposit Insurance Corporation.)

To conduct a pro-consumer overdraft review and ensure 100% compliance — guaranteed! — contact us.

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 JMFA’s principal compliance liaison for regulatory requirements of overdraft services, including consumer protection issues and strategies that enhance safety and soundness.

JMFA provides community banks and credit unions with comprehensive overdraft consulting with consumer-focused recommendations, data-driven intelligence, and a 100% compliance guarantee to address your evolving needs. To learn more, contact your local representative or call us at 800-809-2307.


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