One barrier is the CFPB’s proposed treatment of overdrafts, which “effectively prohibits linking prepaid cards to overdraft services ... and prohibits imposing any fee when an account is in overdraft status,” ABA said. Without a penalty for overdrawing the account, underbanked prepaid customers would lose an opportunity to learn how to prudently manage their finances. ABA explained:
The result will be the suppression of a promising option to move people without bank accounts into financial products offered by insured depository institutions. Thus, rather than creating guardrails, the proposed overdraft services treatment, coupled with other onerous provisions, will create regulatory potholes and barriers to needed and valuable financial products.
Read the letter.