Photo by Martin Barraud/iStock PORTFOLIO ◎FOCUS COMPLIANCE How banks can tighten up their overdraft practices A pair of recent reports by the Consumer Financial Protection Bureau warns against banks abusing their overdraft practices beyond what's lawful. Here's how the CFPB is cracking down and what community banks can do to maintain overdraft oversight. By Mary Thorson Wright n the coming year, the Consumer Financial Protection Bureau (CFPB) will place a renewed emphasis on overdraft programs, fees charged and banks' compliance with applicable rules. Other federal bank regulatory agencies are bound to pick up this issue, creating a renewed emphasis on community banks' overdraft programs, particularly fees and the way banks impose them. Why is this happening? Several lawsuits, examinations and regulatory enforcement actions regarding overdraft fees and practices have influenced a change in the CFPB's appetite to pursue institutions that may be taking advantage of account holders with unseemly practices and violating federal regulations. CFPB alleges exploitative conduct Lawsuits, examination findings and enforcement actions for overdraft fees and procedures portray practices such as: Charging overdraft fees by misclassifying nonrecurring debit card transactions as " recurring " Charging unauthorized overdraft fees for account holders who say they never opted in or requested overdraft protection Reordering transactions from largest to smallest, rather than chronologically, to lead to more overdrafts and fees Switching to an available-balance method for the purposes of calculating whether a transaction results in an overdraft and/or whether the bank imposes an overdraft fee when a transaction is settled Imposing overdraft fees each time a merchant attempts to process the same transaction " Authorize Positive, Purportedly Settle Negative Transactions " (APPSN Transactions): immediately reducing a customer's checking account balance when a debit card transaction was authorized on an account with sufficient funds to cover the I 30 Q ICBA Independent Banker Q April 2022