Lisa McGreevy, President and CEO of the Online Lenders Alliance (OLA), today issued the following statement in response to the Consumer Financial Protection Bureau’s Online Loan Payment Study:
“Bank account overdrafts are a lose-lose for online lenders and their customers. It is in the customers best interests as well as the lenders best interest for customers to not incur overdrafts. This is why we support payment reminders so that customers do not overdraft their accounts.
OLA’s members follow our Best Practices, which comply with National Automated Clearing House Association (NACHA) rules that require that lenders make one attempt to process payments and if they receive an insufficient funds return, they make no more than two more attempts to collect the pre-authorized amount.
The Online Lenders Alliance welcomes the new research from the CFPB about the effect that bank overdraft and NSF fees can have on consumers. However, it should be noted that the CFPB study on online loan payments was conducted using data from five years ago. In the fast-moving world of Internet lending, five years is an eternity, which is why many of the findings in this report are out of date.
For example, the CFPB study did not take into account the current NACHA ‘total return threshold’ rules, which went into effect last October and transformed industry by effectively limiting the NSF returns of Internet lenders and other ACH merchants to no more than 15 percent of total ACH originations. We believe that, if the CFPB had conducted its study using current data, there would have been a very different outcome.
Initiating a payment request against an account with insufficient funds doesn’t help anyone: the lender does not get paid, and the consumer is hit with a $35 NSF fee by his or her bank. In addition, new NACHA rules effectively limit NSF returns to no more than 15 percent of a merchant’s total ACH originations. Moreover, OLA Best Practices and NACHA rules already prohibit conduct – such as same-day representments and splitting payments – highlighted in the CFPB report.
OLA members are committed to providing customers with convenient, fast credit, including securing customer authorization to use the Automatic Clearing House (ACH) network to both deposit funds into their account and to secure payments on loans when due.”