Shannon Phillips, Deputy General Counsel of the Independent Bankers of Texas, wrote a blog post recently for Christopher Williston's The Missing Linc blog, entitled "Lies, Damned Lies and Statistics." With that title, you just know it has to be about the CFPB.
Phillips is concerned about the CFPB cherry-picking statistics from a 2008 study conducted by the FDIC on overdraft programs and interpreting them for negative effect. Now, accusing the CFPB of distorting the findings of the FDIC on overdrafts might strike some as akin to accusing Goebbels of having taken Hitler out of context when quoting "Mein Kampf". Of course, I wouldn't be one of those people because I'm always fair and balanced.
Shannon's beef is with the spin the CFPB, and its Reichsführer Director, "Recess Richie" Cordray, have been putting on a finding by the FDIC that 9% of overdraft users bear 84% of overdraft fees.Cordray described that 84% as "whopping." I assume he wasn't issuing a racial epithet, but was indicating that this was a "disproportionate" percentage in some respect. Although neither Cordray or Shannon made the allegation, the next logical step in the group-think that dominates the current crowd in power in D.C. is that the 9% being "whopped" are likely to be racial minorities and, therefore, overdraft programs as designed and administered by banks have a disproportionately negative affect on minorities, and...voila!...are discriminatory, unfair, or abusive. Then again, perhaps I'm merely leaping ahead of myself in a power-burst fueled by rampant cynicism.
Phillips suggests that there's another way to approach the lessons revealed by the FDIC's study.
While that statistic is true, that means that conversely approximately 91% of accountholders bore only approximately 16% of overdraft-related fees.
He also quotes from a comment letter to the CFPB from the IBAT.
According to the FDIC’s own statistics, we have an overdraft protection system in the United States that is working for nearly 90% of customer accounts. Instead of dismantling, overhauling or punishing banks for having a huge majority of customers with fewer than four overdrafts per year, the answer lies in the educating and providing clear disclosures to consumers – especially the 13.9% of customer accounts who overdraft their accounts five or more times per year. Once the dual goals of education and disclosure are accomplished, neither the CFPB nor the banks should meddle paternalistically in the lives of bank customers.
"Meddling paternalistically" is the life force of large federal bureaucracies. Without such meddling, they'd have no reason to exist.
Shannon notes that the comment period on the CFPB's recent solicitation of comments regarding overdraft programs ends June 29, 2012 and urges interested bankers to add their voices to a chorus of folks (including the 90% of responsible users of overdraft programs) before that deadline passes. Your guess is as good as mine as to whether the true believers in "behavioral economics," who think they know better how to protect consumers than do consumers themselves because the bureaucrats understand the unconscious motivations of consumers that diabolical banks exploit, will be receptive to considering bankers' viewpoints based upon the facts, but it's always worth a shot. Moreover, if you can get in a nice turn of phrase like "meddling paternalistically," you'll feel better, even if you don't exert an ounce of ultimate influence.