CFPB warns against use of 'phantom opt-ins' for OD fees

The CFPB has announced it has published Consumer Financial Protection Circular 2024-05 on "Improper Overdraft Opt-In Practices" to address whether a financial institution can violate the law if there is no proof that it has obtained consumers' affirmative consent before levying overdraft fees for ATM and one-time debit card transactions.

According to CFPB Director Rohit Chopra, “The CFPB has found instances where banks have no evidence that they obtained consent for overdraft. No Americans should be hit with bank account fees that they never agreed to.”

The CFPB reports it has observed that in many circumstances, financial institutions have created serious obstacles to consumers taking steps to anticipate and avoid overdraft fees, and cites several enforcement actions the Bureau has taken against banks that failed to properly adhere to the requirements of section 1005.17 of Regulation E.

The Bureau's press release suggests that consumer protection law enforcers "should assume consumers have not opted into overdraft [service for ATM and one-time debit card transactions] unless the banks can prove otherwise," and that "some banks have been unable to provide such evidence." The Circular lists three examples of forms of records that banks might use to document consumer consent, depending on the channel through which the consumer opts in. The examples are not all-inclusive or exhaustive:

• For consumers who opt into covered overdraft services in person or by postal mail, a copy of a form signed or initialed by the consumer indicating the consumer’s affirmative consent to opting into covered overdraft services would constitute evidence of consumer consent to enrollment.
• For consumers who opt into covered overdraft services over the phone, a recording of the phone call in which the consumer elected to opt into covered overdraft services would constitute evidence of consumer consent to enrollment.
• For consumers who opt into covered overdraft services online or through a mobile app, a securely stored and unalterable “electronic signature” as defined in the E-Sign Act (15 U.S.C. 7006(5)) conclusively demonstrating the specific consumer’s action to affirmatively opt in and the date that the consumer opted in would constitute evidence of consumer consent to enrollment.