WASHINGTON - 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.
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CRL’s report includes:
âBank consultant pitches on pinpointing customers who will overdraft most.
âEvidence these customers are likely to be low-income, single, nonwhite.
âA 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.
The Center for Responsible Lending is a nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices. CRL is affiliated with Self-Help, one of the nation's largest community development financial institutions.