Cordray Clarifies CFPB Overdraft Intentions

By J. Daniel YoungFebruary 09, 2016

The Director of the CFPB offered clarification on his call to actionfor financial institutions to offer accounts that can't produce a negative balance during his fifth webinar with the NCUA on Feb. 9.

NCUA Chairman Debbie Matz hosted Director Richard Cordray during the afternoon webinar in which he was quizzed on the agency’s call to action and a bulletin warning that inaccurate reporting data used in the checking account screening process could result in action by the bureau.

In his opening statement, Cordray said there are nearly 10 million people who do not have access to financial services. He added this is in part a result of the accuracy of the screening process.

“These consumers frequently rely on more expensive financial services that take a big bite out of their earnings,” he added.

Cordray encouraged financial institutions to offer lower-risk account options, including accounts that would not allow for overdrafting the account.

“Because these accounts pose less risk to financial institutions, there’s less reason to screen out those applicants from opening such accounts,” Cordray said.

“We know that our credit unions are committed to community development and financial inclusion,” he said. “This could be part of the answer for the millions of Americans who currently lack access to basic financial services that most of us take for granted.”

When asked, during the Q&A session, how far along the bureau is in the overdraft rulemaking process, Cordray did not offer a direct answer, instead discussing other rules expected to be proposed or finalized first.

One attendee questioned why the CFPB would focus on overdraft protection because it doesn’t produce the most complaints in the bureau’s consumer complaint database. Cordray said the CFPB is looking at the overdraft issue because each regulatory agency has taken different approaches to the concern, and regulatory consistency is needed.

When asked why the CFPB does not use its discretion to exempt smaller institutions from most of its rules, Cordray explained that Congress has that authority. Congress decided not to apply a threshold relating to rules from the CFPB.

“Congress made that judgement. I don’t feel it’s in my authority to second guess Congress or overrule them on that,” Cordray said.

He added the bureau could contour specific rules to allow certain exemptions within the confines of the language of those particular pieces of the statute,

“[W]e are both willing and quite content to do so,” he said.