It’s the Banks Turn: The CFPB Opens Inquiry Into Overdraft Practices and Begins Accepting Consumer Complaints Regarding Depository Services
Two developments at the Consumer Financial Protection Bureau (CFPB) have brought traditional banks into the active regulatory eye of the CFPB. First, on February 22, 2012, the CFPB announced the launch of an inquiry into checking account overdraft programs. Through this inquiry, the CFPB is seeking public comment on a sample “ penalty fee box – a disclosure on a consumer’s checking account statement that would highlight the amount overdrawn and total overdraft fees charged.” This prototype would explicitly tell consumers how much they have paid in overdraft fees per month, and it would tell consumers three different ways to prevent the collection of these fees from happening in the future by: (1) receiving text messages from the bank to track the balance of the checking account; (2) linking a savings account to a checking account; and (3) opting out of the overdraft program.
Additionally, the CFPB announced on March 1, 2012, that the CFPB is in the third phase of the Consumer Response complaints program and has begun taking consumer complaints on checking and savings accounts. In July of 2011, the CFPB began taking credit card complaints, and in December 2011, the CFPB began handling complaints on mortgages and other home loans. The CFPB continues to promise that by the end of 2012, it will be taking consumer complaints on all financial products and services. Consumers can file a bank account complaint with the CFPB using the Bureau’s website, or by mail, fax, or telephone.
What Does this Mean for the Banks?
Penalty fees have been the subject of major litigation against banks, and now the CFPB has joined the fray, adding more pressure and regulatory risk to that source of fee revenue. Moreover, the CFPB complaint process is the tip of the regulatory spear. The CFPB has made clear that the more numerous complaints a financial institution incurs, the riskier it sees that business. The riskier the CFPB sees a business, the more inquiries and prodding from the CFPB.
The CFPB also expects banks to respond to complaints within fifteen days and is pushing for banks to close all complaints within sixty days. This is seemingly impossible for large scale institutions whose various offices span the country. It is vital that for banks, both large and small, as well as for all financial services institutions, that a cohesive program is put into place to efficiently and effectively handle complaints.
Troutman Sanders is an accomplished and experienced leader in providing litigation and regulatory advice to a broad spectrum of financial services institutions. Troutman Sanders’ CFPB Team monitors the development and activities of the CFPB on its CFPB Report blog and also advises clients on CFPB and Dodd-Frank issues. Additionally, Troutman Sanders’ Financial Services Litigation practice group has successfully litigated a wide array of individual and class action litigation, as well as other federal and state consumer protection laws now under the umbrella of the CFPB.
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