The Consumer Financial Protection Bureau (CFPB)’s review of unfair and abusive overdraft practices is complemented by its recent efforts to limit the use of forced arbitration, said five consumer groups in a joint letter sent today to Director Richard Cordray. U.S. Senate leadership is pushing for a vote this week on a Congressional Review Act (CRA) resolution to repeal a CFPB rule that restores consumers’ right to join together in court against banks and lenders.
The letter – signed by Americans for Financial Reform, Center for Responsible Lending, National Association of Consumer Advocates, National Consumer Law Center (on behalf of its low income clients) and Public Citizen – was sent in advance of the Community Bank Advisory Council (CBAC) meeting tomorrow with Director Cordray to discuss “Know Before You Owe: Overdraft” and financial empowerment initiatives.
“We are hopeful that the CBAC will recommend real and lasting solutions that address this problem head-on – solutions that go well beyond disclosure and address the size and number of overdraft fees institutions mount on their customers,” wrote the consumer protection groups. “Overdraft fees, quite simply, keep citizens in communities throughout our country from being able to climb the ladder of opportunity towards success,” they said in the letter, pointing to the CFPB’s recent study which found that 79% of all overdraft and non-sufficient funds fees are paid by 9% of customers whose accounts are frequently overdrawn.
The groups expressed concern that “chasing profits through overdraft fees – regardless of the impact on consumers – has led to a culture of fraud and unscrupulous practices in our country’s banks,” noting that Bank of America, Wells Fargo, JPMorgan Chase, and others were all taken to court by their customers for the practice of reordering transactions in order to maximize revenue and profits from overdraft fees.
While the other banks settled, the letter notes that Wells Fargo continues to avoid accountability. In arguments to the 11th Circuit Court of Appeals last month, the bank argued that millions of customers affected by its deceptive overdraft practices should be forced to bring claims one by one in a biased arbitration process rather than band together in a class action lawsuit. The letter states that Wells Fargo’s conduct underscores “the need for protections like the CFPB’s recent arbitration rule, which gives consumers the tools to defend their own interests by restoring our right to join together in court.” If the Senate repeals the rule, millions of people will be left vulnerable to rip-offs like unauthorized overdraft charges.
A full copy of the letter can be found here: http://www.fairarbitrationnow.org/wp-content/uploads/Letter-to-CFPB-for-Overdraft-Meeting.pdf