How to fix the $30 billion checking account overdraft problem

Observations from the Fintech Snark Tank

A White House press release entitled Reading of the third meeting of the White House Competitiveness Council reports that:

“The Consumer Financial Protection Bureau has taken steps to crack down on the nearly $30 billion in “junk fees” — like late-draft fees, bad check fees — that Americans pay each year. Spurred on by CFPB measures, three quarters of the country’s 20 largest banks are getting rid of bad check fees. Overall overdraft fee levels are projected to decrease by $3 billion in 2022 compared to pre-pandemic levels.”

A new study by Cornerstone Advisors, commissioned by Velocity Solutions, is titled Beyond Overdrafts: Helping Consumers Manage Cash suggests that this may be Not good news for Americans – and not in line with what they expect from the banks they do business with.

The hidden fee fallacy

Politicians (and other critics of the banking industry) love to criticize banks for supposedly “hidden fees” they charge their customers.

Americans have a different perspective.

Eight in 10 Americans — including two-thirds of Gen Zers, eight in 10 Millennials and Gen Xers, and nearly nine in 10 Boomers — told Cornerstone that their primary checking account providers adequately disclose their fees.

This finding is ignored by the press and overlooked by the CFPB, which has been working for years to impose additional disclosure requirements on banks, believing that banks must withhold information. The survey data does not support this thinking.