Small banks are pushing to be exempted from what they call an unneeded and overly burdensome U.S. data-collection effort to spot how consumers may be abused by checking account overdraft fees and other charges.
The Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, and Federal Reserve on Feb. 21 proposed that banks add data about the fees to their required call report, a quarterly public accounting of their main assets and liabilities. The regulators said the Consumer Financial Protection Bureau needs the information to carry out its mandate to root out abusive practices in the industry.
"Calling for more granular disclosures of consumer fees in the call report serves no necessary regulatory purpose," James Kendrick, vice president for accounting and capital policy at the Independent Community Bankers of America, wrote in an April 22 letter. "Most banks currently provide or make available to their customers fee schedules that fully disclose all service charges."
The group also said the additional collection would be an added regulatory burden that should be alleviated by exempting banks with less than $10 billion in assets.
The small banks said that the proposal overlooks the fact that they offer "tailored products that meet the needs of the communities they serve" and are hard to fit into regulators' categories. "The disclosures proposed are relevant only for the largest depository institutions," they wrote.
The consumer bureau, created by the 2010 Dodd-Frank Act, has a mandate to supervise and enforce the laws on banks with assets above $10 billion. It has vowed to be "data-driven" in its mission, and is buying and collecting large amounts of information on consumer finance.
The move has drawn criticism from banks, who have complained about the regulatory burden, and congressional Republicans, who have complained it's a potential privacy concern. Cordray countered in an April 23 hearing by saying that banks already do the same thing and more.
The new reports would include itemized data on overdrafts, monthly maintenance charges and automated teller fees on consumer accounts, according to the proposal. There is currently no data that allows estimates of the composition of the fees, or how they affect consumers and bank earnings, it stated.
"Data specific to overdraft-related fees is particularly pertinent for supervisors and policy makers in part because of recent trends in such fees and because of concerns about the harm such fees may impose on some depositors," according to the proposal.
Smaller banks are relatively more dependent on overdraft fees than larger banks, according to Camden Fine, president of the Independent Community Bankers of America. In an interview in February, Fine said revenue from overdraft fees represents 3 percent to 15 percent of total income for institutions in his association. By contrast, 2011 financial disclosures show that overdraft fees provided about 1 percent of net revenue for Wells Fargo & Co., the fourth-largest U.S. bank.
Groups that represent larger banks have taken a harder position than the smaller banks, urging the regulators to withdraw the proposals entirely. The Financial Services Roundtable, the American Bankers Association and the Consumer Bankers Association said in an April 22 letter that the proposal is "a major departure" undertaken without prior consultation.
The agencies proposed that the new reports take effect for the quarter ending June 30.
The consumer bureau last began an investigation of overdrafts as a potential source of consumer harm, a probe that has now slowed and could take "a couple of years," the agency's director, Richard Cordray, said on Feb. 5.
Consumer groups — the same ones who pushed hard for the agency's creation — want tougher overdraft rules, saying that banks don't make their policies clear and that fees hit hardest at people least able to afford them.
Community banks, which have pressed the bureau for exemptions from rules, say stricter policies could choke off a key stream of revenue. Their position resonates because the banks and credit unions have been courted by bureau officials as a counterweight to Wall Street banks.
Consumers paid $32 billion in overdraft fees in 2012, up slightly from $31.6 billion for 2011, according to Moebs Services, a Lake Bluff, Illinois-based research firm. Overdrafts occur when consumers spend or withdraw more money than is available in their checking accounts, whether through the use of debit cards, checks, ATM withdrawals or direct debits.
