In what order do you process your checks?
by. Henry Meier
There are some issues that are hanging over the industry like a sword of Damocles. This morning an article in the Wall Street Journal provides further evidence for those who feel that the CFPB should do more to regulate overdraft fees.
According to a survey conducted by the paper, hundreds of small, regional banks, and credit unions are “clinging to the practice” of processing checks on a high to low basis. The paper’s survey revealed that smaller depository institutions are continuing this practice even as larger institutions are backing away from it.
What exactly to do about overdraft fees has been debated for more than a decade now. In 2010, the Federal Reserve promulgated regulations requiring that members opt in to bank payment on debit card overdrafts. I was silly enough to think that this would put the issue to a close, but it hasn’t. For example, in a statement accompanying a 2013 report on overdraft processing, CFPB warned that if “policies and practices do not protect consumers in accordance with consumer protection law, it will use it authorities to provide such protection.”
The more I look at the issue, the more I feel that overdraft fees are the most misunderstood practices engaged in by depository institutions. Do they represent an important source of income for many banks and credit unions? Absolutely, but I bet if you asked your average consumer if they are willing to pay more to make sure that their mortgage or car payment doesn’t bounce, they’d agree. In other words, overdraft fees are a product that some consumers want and need.
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