Community bankers are concerned over the Consumer Financial Protection Bureau’s plan to lower overdraft fees, according to IntraFi’s business outlook survey of CEOs, presidents, CFOs and chief operating officers from nearly 500 banks.
The proposal, announced Jan. 17, includes two ways for banks and credit unions to determine costs. One would allow financial institutions to calculate their own overdraft expenses and losses using the CFPB’s proposed standards, while the second would use benchmark fee rates set by the bureau — $3, $6, $7 or $14.
Banks with less than $10 billion in assets are technically exempt from the proposal, but 44 percent of bankers still plan to lower their fees to remain competitive with larger banks. Thirty-five percent expect to change their overdraft policy and 27 percent plan to either add or raise other fees associated with other services if the proposal is implemented.
Bankers were also surveyed on the Federal Reserve’s debit card interchange fee proposal and CFPB’s plan to cap credit card late fees. The interchange proposal, introduced in October, would tighten the limit on debit card interchange compensation that banks earn. The revamp would lower Durbin amendment caps in Regulation II to 14.4 cents and .04 percent of a transaction, plus a 1.3 cent fraud-prevention adjustment. The change from the current rate — 21 cents and .05 percent of the transaction, plus a one-cent fraud-prevention adjustment — would be effective June 30, 2025.
Seventy percent of bankers would make no changes if fees were lowered. Twenty-six percent plan to add or raise fees associated with other banking services, and 16 percent will either eliminate or reduce free checking accounts.
In March, the CFPB released a finalized rule that caps consumer credit card fees at $8 per incident. The rule applies to credit card issuers with more than 1 million open accounts. According to the CFPB, the rule will limit fees that currently cost American families more than $14 billion annually and save them more than $10 billion in annual late fees.
Eighty-three percent of bankers plan to take no action once the CFPB’s credit card late fee proposal is finalized. Eight percent expect to charge higher interest rates on customers who carry a balance, raise their annual fees and charge new fees.
On April 18, the House Financial Services Committee approved a resolution nullifying the late fee rule. The proposal, authored by Chair Andy Barr (R-Ky.), still faces steep odds to pass, and must first be approved by both the House and Senate before being signed by the president.
Other report findings included:
- Seventy-eight percent of bankers said their bank’s access to capital was the same as 12 months ago. Seventy percent expect access to capital to remain the same 12 months from now.
- Forty-two percent said current loan demand was the same as 12 months ago, while 32 percent experienced a moderate decrease. Forty-three percent expect a moderate increase in loan demand 12 months from now, while 35 percent anticipate loan demand will stay the same.
- Eighty-seven percent reported increased funding costs from a year ago. Forty-one percent expect funding costs will increase a year from now. Sixty-seven percent said deposit competition had heated up from 12 months ago, while 49 percent expect deposit competition to increase in the next 12 months.
- Forty-nine percent said economic conditions are unchanged from 12 months ago, while 32 percent reported moderate worsening in economic conditions. Forty-three percent expect economic conditions to be unchanged in the next 12 months, while 38 percent anticipate moderate worsening.