On September 17, 2024, the CFPB published guidance to help federal and state consumer protection enforcers stop banks from charging overdraft fees based on phantom opt-in agreements. According to CFPB Director Rohit Chopra, the Bureau has found instances where banks have no evidence that they obtained consent for overdrafts.
Phantom opt-ins occur when banks claim they have customers’ consent to charge overdraft fees but there is no proof they actually obtained that consent. Under the Electronic Fund Transfer Act, banks cannot charge overdraft fees on ATM and one-time debit card transactions unless consumers have affirmatively opted in. Consumer protection law enforcers should operate under the assumption that consumers have not agreed to overdraft unless banks can demonstrate otherwise. The CFPB has discovered that some banks have failed to provide this evidence before imposing fees on consumers for overdraft loans related to ATM and one-time debit transactions.
Through the guidance, the CFPB has provided examples of forms of records that demonstrate consumer consent to enrollment to overdraft services:
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; and
For consumers who opt into covered overdraft services online or through a mobile app, a securely stored and unalterable “electronic signature” 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.
Read the CFPB’s press release here.
The Circular can be found here.