In a declaration sent for the record ahead of a Senate Banking subcommittee hearing on overdraft Wednesday, the American Bankers Association highlighted the crucial function that overdraft defense plays as a source of liquidity for American customers and advised legislators to decline any legislation that would limit these offerings. Citing information from a current ABA/Morning Consult study, ABA highlighted that 9 in 10 customers discover their bank’s overdraft defense important, and well over half think it is sensible for banks to charge a charge for the service.
“Restrictions on overdraft may lead financial institutions to stop offering these services, which would result in significantly more returned checks and declined transactions,” ABA warned. “This, in turn, will mean that consumers will pay returned item fees charged by the payee or merchant and late fees, and may have lower credit ratings or be required to pay using cash, a cashier’s check or a money order.”
As legislators analyze overdraft defense services, the association advised them to regard and safeguard customer option, keeping in mind that customers who do not want to have access to overdraft services have sufficient chances to open overdraft-free accounts, consisting of Bank On-accredited accounts, which are used by organizations comprising 56% of the U.S. deposit market. ABA likewise required a robust CFPB research study of overdraft use that supplies “an evidence-based understanding of regular users of overdraft protection,” and gotten in touch with Congress minimize barriers that avoid banks from using budget-friendly small-dollar credit alternatives.