Fitch Ratings says CFPB overdraft inquiry could hasten the disappearance of free checking

Fitch Ratings warned last week that the Consumer Financial Protection Bureau’s continued inquiry into overdraft policy increases resource pressure on banks, which may ultimately lead to the end of free checking.

“We also anticipate the CFPB inquiry, coupled with regulatory and legislative changes, will further hasten the demise of free checking accounts, which have been broadly adopted across the industry in various forms,” Fitch Ratings said.

The CFPB inquiry was announced in February and is targeted at the marketing materials and customer service scripts used to enroll customers in overdraft programs. The agency seeks to discover whether these materials could be seen as confusing to American consumers.

Fitch Ratings also said that because of the added pressure resulting from the overdraft inquiry, along with other resource pressures, banks will have difficulty in gaining customer acceptance of new fees without coming to a competitive disadvantage.

The ratings agency also said that overdraft fees are a major source of revenue for U.S. banks and further restrictions would add increased stress to an already struggling income source.

In 2011, American consumers paid approximately $32 billion in overdraft fees, a decrease from slightly more than $33 billion in 2010. Greg McBride, a senior analyst at, said that increasing regulations could force some banks to recoup lost revenue in the form of fees on basic checking that was once free.

“The economics of the checking account become vastly different without that overdraft income,” McBride said, according to Bloomberg.

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