CFPB report attacks courtesy pay

by. David Morrison

A new CFPB report found consumers who overdraw their checking accounts with debit cards generally overspend by small amounts, but pay very high costs for doing so.

According to the agency’s research, the majority of debit card overdrafts occured on transactions of less than $24, and consumers returned their accounts to a positive balance within three days. Nevertheless, the CFPB said they paid an average of $34 per overdraw that resulted in an effective interest rate of 17,000%.

Further, the report suggested that programs like courtesy pay on debit transactions did not really help consumers. For example, 18% of consumers who opted in for that type of overdraft protection overdrew their accounts more than 10 times per year, while only 6% of consumes who declined to opt-in overdrew their accounts that often.

Further, consumers who opted in for courtesy pay paid seven times the overdraft and NSF fees ($260) than those declined to opt in ($35).

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