U.S. banks are seeking to shield from scrutiny the $30 billion they collect annually in checking-account fees, saying a proposed requirement for periodic reports is unacceptable even if it exempts small institutions.
The dispute is the latest installment in a multi-year fight between the industry and the Consumer Financial Protection Bureau over how to monitor the way banks assess charges on their depositors, particularly when people overdraw checking accounts.
The bureau, along with the Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency, proposed last year that all institutions include detailed breakdowns of their revenue from account fees in the public quarterly reports they file with the FDIC. That would give the consumer bureau data it could use to write new regulations curbing revenue from overdraft services.
Small banks, which earn a larger slice of their revenue from such fees than big institutions, pushed back on the plan. Their resistance led the FDIC and OCC, which regulates nationally chartered banks, to break ranks with the consumer bureau and oppose the change, according to a person briefed on the deliberations who spoke on condition of anonymity because the discussions weren't public.
Andrew Gray, a spokesman for the FDIC, declined to comment, as did OCC spokesman Stephanie Collins.
Exempting Banks
The regulators on Jan. 14 released a revised plan, which would exempt banks with assets under $1 billion. The Independent Community Bankers of America, a trade group representing small institutions, still didn't back the idea, saying that institutions with as much as $10 billion in assets should be excused from the reporting.
"The information-gathering effort put forth in the notice represents the latest in a long line of new regulatory burdens faced by these institutions," James Kendrick, the group's vice president for accounting and capital policy wrote in a Feb. 13 letter to the bureau.
Regulators have focused on potential abuse in the way the banks sign up customers for what they frequently market as overdraft protection. The consumer bureau said in a June report that banks may be misleading customers in sales pitches, and that those who use the service face more involuntary account closures.
If a customer with overdraft services writes a check or swipes a debit card that draws an account below zero, banks don't refuse the payment. Instead they cover the sale and charge a fee as high as $30, plus interest on the overdrawn amount, according to industry consultant Moebs Services Inc. of Lake Bluff, Illinois.
'Management Tool'
Banks say that customers sign up because they value knowing that their transactions will always go through.
"For many small businesses and many individual customers, overdraft protection is used as a financial management tool," Cam Fine, president of the community bankers group, said in an e-mail. "That is what regulators just can't get through their heads."
Larger banks also oppose the data collection. The Financial Services Roundtable, the Consumer Bankers Association and the American Bankers Association all questioned the legal authority for the move, according to an April 22, 2013 letter. They also said the quarterly documents, known as Call Reports, were designed for prudential regulation, not consumer research.
"This would be a major diversion from the existing purposes of the Call Report," the groups wrote.
Strained Ties
The consumer bureau's effort to obtain data on overdrafts is straining its ties with the community banks that the agency has wooed as a counterweight to Wall Street's political heft. While large banks account for the lion's share of the $30 billion in annual fee revenue, banks with fewer business lines rely more heavily on the revenue.
The regulators' concession in their latest proposal to exempt institutions with assets under $1 billion would remove about 90 percent of the 6,891 U.S. banks as of Sept. 30, according to data from the FDIC.
"Leaving out those institutions below $1 billion in assets leaves a huge gap in the data," Michael Moebs, the economist who founded Moebs Services, said in an e-mail.
The consumer bureau is continuing to study the matter and may consider other regulations, spokeswoman Jen Howard said.
Richard Hunt, president of the Consumer Bankers Association, which represents large banks, said he believes that the proposal for data collection is a prelude to more sweeping plans by the agency.
"Much that we have seen so far out of the CFPB is leading up to action on overdraft," Hunt said. "It is an issue the agency has been examining for a while and not quietly."
