The bureau is advising consumers to transfer balances to insured banks and credit unions.
06/16/2023 1:00 P.M.
3 minute read
The Consumer Financial Protection Bureau continues to issue enforcement actions, research reports and bulletins on a regular basis.
Here are a few of the bureau’s updates you should know about this week:
CFPB Analyzes Insurance Coverage on Funds Stored Through Payment Apps
Earlier this month, the CFPB published an issue spotlight warning of security concerns related to digital payment apps widely used by consumers and companies. According to the report, because the money may not be maintained in banks that are covered by federal deposit insurance, money deposited on these apps might not be secure in times of financial difficulty. Customers who hold money in these apps were also given advice by the CFPB on how to keep their money secure.
“Popular digital payment apps are increasingly used as substitutes for a traditional bank or credit union account but lack the same protections to ensure that funds are safe,” said CFPB Director Rohit Chopra. “As tech companies expand into banking and payments, the CFPB is sharpening its focus on those that sidestep the safeguards that local banks and credit unions have long adhered to.”
Among other things, the spotlight found that:
- More than three quarters of adults in the U.S. have used a payment app.
- Nonbanks can earn money when users store funds on their platforms.
- Funds sitting in payment app accounts often lack deposit insurance.
- User agreements often lack specific information.
Until payment apps are designed to automatically sweep balances into a user’s insured account, the bureau states that consumers may need to move their balances stored in payment apps.
Read the CFPB’s issue spotlight.
CFPB Report Finds Overdraft/NSF Revenues Down 50%
On May 23, the CFPB published a report examining patterns in overdraft/non-sufficient fund (NSF) fee revenue and practices for the past one and a half years.
The bureau found that in the fourth quarter of 2022 alone, overdraft/NSF revenue was over $1.5 billion less than in the fourth quarter of 2019—a decline of 48% from before the pandemic, indicating a future yearly reduction of nearly $5.5 billion. This decline shows that households that pay overdraft or NSF fees save an average of more than $150 annually; many households have saved significantly more.
“Evidence continues to suggest that financial institutions are not increasing other checking account fees to compensate for reduced overdraft/NSF revenue. Across all reporting banks, combined account maintenance and ATM fees remained flat from 2019 to 2022,” the bureau reports.
CFPB Reviews Rules and Guidance on Mortgages
On May 17, CFPB Director Rohit Chopra announced that the bureau is currently reviewing several of its rules and guidance documents in an effort to eliminate unnecessary complexities and create more durable rules that don’t over-rely on single entities.
“We have found that many of these policies were drafted in ways that are unnecessarily complex, often to accommodate the preferences of dominant industry incumbents, rather than the market as a whole,” Chopra said in the news release. “We identified a particularly serious problem in federal mortgage rules that has major implications for the market.”
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