In the news WF is getting beaten up by the CFPB. My question is how is it the banks fault that the customer is spending more money then they have in their account???

From the article:
Illegally charged surprise overdraft fees: For years, Wells Fargo unfairly charged surprise overdraft fees — fees charged even though consumers had enough money in their account to cover the transaction at the time the bank authorized it — on debit card transactions and ATM withdrawals. As early as 2015, the CFPB, as well as other federal regulators, including the Federal Reserve, began cautioning financial institutions against this practice, known as authorized positive [or authorized positive, settled negative (APSN)] fees.

Not my area of expertise but I was unaware it was "illegal" to charge an overdraft fee when a customer overdraws their account. What am I missing or is this another example of changing the law through enforcement?

What am I missing or is this another example of changing the law through enforcement?

You are missing nothing and apparently Wells consented to get this behind them that further strengthens the CFPB's hand.

"Surprise overdraft fees have been a recurring issue for consumers who can neither reasonably anticipate nor take steps to avoid them."

This is the line that really gets me. The fact that consumers can neither anticipate nor take steps to avoid them. No personal accountability on managing your account and balancing your checkbook. I have overdraft my account 3 times in my life and each time it was because I forgot to track a check I wrote or an ACH I had scheduled. Never did I blame the bank or anyone else. Each time I got upset at myself since I had the money in my savings account to cover it, but I learned from each instance and now I take steps to prevent myself from making the same mistake again. Just seems crazy to me.

This is the idea that when a debit transaction is authorized, that means it is authorized and has money available for payment. Charging a fee on the back-end could legitimately surprise a consumer on a transaction that had preauthorization.

Charging a fee on the back-end could legitimately surprise a consumer on a transaction that had preauthorization.

Oh yes, it is a total surprise when you spend more money that you have.

Unpopular take but I do, in some circumstances, understand this. So if I go to the store and spend $50, there's $100 in my account, so my card goes through. Now I theoretically have $50 in my account. A check I forgot about for $125 comes through and I get an overdraft fee. Ok, totally my fault. The issue is that then the $50 transaction finally posts, and I get a second overdraft fee. That transaction had happened when my account had the funds, and using the available balance, I would have only received the one fee. Instead my mistake is costing two fees when I though the funds were already deducted. This has not actually happened to me, but I understand the frustration. Is it still their error? Absolutely. Should they receive the second overdraft fee? I don't know. I guess it's all in how clearly you disclose things.

IMO - If I am the one in this scenario and I forgot that I had wrote a check for $125, then yes I should pay for the second overdraft fee. In the end it is my responsibility to keep up with my account and have the check that I wrote already factored into how much money I have available. I have messed up before. No one is perfect, but I messed up so I rightly paid the fee. I made the error so there should be a consequence.

If i'm understanding this correctly, i'm sort of with Chinchilla Fan on this one....i don't think anyone is disputing that there should be a consequence (and overdraft fee)....but in the scenario CF presented, i think that ONE OD fee is the proper punishment....not 2.

Not really my area, so if my understanding is flawed, i may have to revise my opinion.

Well, unless the customer opted into the financial institution's ODP program, they would never get an overdraft fee associated with a preapproved debit card payment in the first place.

I agree with Chinchilla Fan on this one as well.

I will also note that in at least 1 consent order regarding APSN fees, the consumers had not opted in.

I also disagree that spending more money than you have is a surprise. The only way I can justify this in my mind and kind of get behind it is:

Customer 1: opts in to Reg E- transaction approved positive, settles negative- OD fee is charged.
Customer 2: opts out of Reg E- transaction approved positive, settles negative- OD fee is not charged.

There is no difference between these two transactions, other than whether an OD fee was charged. The transaction is still paid. The person that opted in to overdraft services for debit card transactions has no additional benefits of opting in when it comes to this particular transaction. Therefore, I could see this as being unfair to Customer 1 by comparison.

To my way of thinking, if i have $100 in my account and write a check for $105 and have a debit card transaction for $20, it doesn't really make a lot of sense for me to get 1 OD charge if the debit card transaction hits first, but 2 OD charges if the check hits first...yet my debit card transaction still works. The amount of the overdraft is the same no matter what.

ETA: what has always seemed most equitable to me when it comes to overdrafts are fees based on the amount of the overdraft. Seems like a world of difference to me between someone who overdrafts by $2000 all in one transaction and someone who overdrafts by $100, but maybe with 5 different items causing the total.

Customers are fools for opting-in - you live by the sword you die by the OD fee. But we no longer live a world that imposes any personal responsibility for anything or most any actions.

I"m all about personal responsibility......i watch my accounts like a hawk and make sure i don't overdraft....but i can't say i've never been overdrafted in my life....and everyone's situation is different....ii'm sure some overdrafts aren't by lack of awareness, but out of pure necessity. I just believe in equitable penalties. JMO.

Sort of like the $250 speeding ticket i got for going 46 in a 35 in a podunk town that raises all its municipal funds by outrageouly priced tickets. Did i deserve a ticket? Of course. For $250? Heck no, if you ask me.

"To my way of thinking, if i have $100 in my account and write a check for $105 and have a debit card transaction for $20, it doesn't really make a lot of sense for me to get 1 OD charge if the debit card transaction hits first, but 2 OD charges if the check hits first...yet my debit card transaction still works. The amount of the overdraft is the same no matter what."

First off I love these conversations and getting everyone's thoughts on these situations.

Second - Here is my problem. If you knew that you had $100 in your account and then you write a check for $105 and use your debit card for $20. You should know that depending on how fast that checks gets cashed you are taking a risk to get charged 2 overdraft fees. If the timing happens in a way that you only get charged 1 than that is awesome, but you still created the situation by spending money that you didn't really have. At least that is how I see.

Now if the discussion is should there be a flat overdraft fee charged no matter how much the transaction is that causes a customer to overdraft, then there is were I believe the unfairness can come into play. Should a $5 transaction cause you to get charge a $35 overdraft fee. If the examiners were coming from that prospective then I could wrap my head around their arguments much better.

Maybe i wrote the $105 check the same day as the debit card transaction......in a perfect world, yes, we'd all be responsible all the time and there would be no need for overdraft fees or speeding tickets.

Let me just ask this....in most banks, who is most likely to get their OD fees waived....the commercial customer who can't manage their account and overdrafts by thousands, or the college kid who can't handle his account and overdrafts their account by a hundred bucks every month?

Is that "fair"?

At the banks I have worked at both would qualify for a waiver but if they were a habitual offender then they wouldn't.
Besides, I don't think WF was being punished for how they were waiving fees or not.

Well, the CFPB has pretty much made all of these discussions moot. All banks will soon eliminate all OD fees to avoid any risk and then just return any and all items that they can under the existing rules and leave the risk to the check holders to charge them a return check fee. Consumers will then scream that is unfair and banks should pay their overdrafts, very similar to the fact that banks should take the loss when they get scammed.

Speaking of junk fees: https://www.ftc.gov/news-events/new...harms-caused-junk?utm_source=govdelivery

THIS. 1000% THIS

In fact, i've stopped engaging internally about the "unfairness of the CFPB" because i have no control over their unfairness. Simply make changes and move on or don't make changes and get penalized - there are no other options unless you want to be the one to sue them. our bank doesn't, so we make changes and move on.

In my opinion, there is something else to consider here. Given Wells history, it is much more likely than not that WF had their hand slapped over this issue at least once before.

About five years ago, I worked for an institution much, much smaller than WF, and it got slapped around on this very same issue. We had to go through all the hoops; look back, reimbursement, modified disclosures, procedural changes. My EIC made it very clear that they were taking orders from DC, and all of our remediation had to be cleared through them. No CMPs or negative press, as we immediately fixed the issues.

This issue has been around long enough that the big boys should have known about it and how to avoid getting in trouble over it. At the time my former bank was cited, our core provider had a fix. As the same old story goes, management made a decision to not implement the fix without consulting Compliance. That fix was put in place, and that bank has not had any issues since.