Consumer Financial Protection Bureau Director Rohit Chopra has appointed two opponents of traditional overdraft policies to head the agency’s enforcement and supervision divisions—a sign that the agency could get more aggressive in policing those policies.
Lorelei Salas will join the agency as assistant director for supervision policy and also will serve as the acting assistant director for supervision examination. From 2016 to 2021, Salas served as the commissioner of the New York City Department of Consumer and Worker Protection.
Eric Halperin will serve as assistant director for the Office of Enforcement. In addition to serving in several positions in the Justice Department, Halperin served as director of the Center for Responsible Lending’s Litigation Program and as director of its Washington office. The center is an affiliate of the Self-Help Credit Union, headquartered in Durham, N.C.
“Lorelei Salas and Eric Halperin are both distinguished public servants with deep expertise in consumer protection,” Chopra said. “Together, they will be effective watchdogs over the financial marketplace, especially when it comes to stopping repeat offenders.”
Salas and Halperin are critics of traditional overdraft policies used by credit unions and banks.
“The value to consumers of overdraft is questionable at best,” Salas wrote in a 2019 letter to then-CFPB Director Kathleen Kraninger. “Overdraft acts as an instant loan, allowing consumers to transact when their balances are low. However, the convenience of overdraft comes at a high price – and it is a price that many consumers pay frequently, draining their already scarce financial resources.”
In 2007, Halperin, then working at the Center for Responsible Lending, told the House Financial Services Committee, “Common banking practices now increase the number of overdrafts rather than minimize them, and can cost the account holder hundreds of dollars in a matter of hours, when they otherwise may have been overdrawn by just a few dollars for a few days or less.”
Last week, Chopra told the Financial Services Committee that he intends to monitor overdraft programs closely to ensure that they are free of unfair or deceptive practices.
Rep. Carolyn Maloney, D-N.Y., has introduced legislation that would require that overdraft fees be “reasonable and proportional” to the cost of processing the transactions and the amount of the overdraft. The legislation also would limit the number of fees financial institutions can charge to one per month and six per year and give consumers the power to decide whether to opt-into overdraft programs.
The National Credit Union Administration board has been struggling with the overdraft issue during the past year.
In January, the board approved a proposed rule that would require credit unions to establish specific time limits for members to either deposit funds or obtain a loan to cover each overdraft. Currently, the NCUA rules prescribe a 45-day time limit for members to solve overdraft problems.
At the time the board considered that rule, Republican Rodney Hood was board chairman. Now, Democrat Todd Harper is NCUA chairman, and he has made it clear that he opposes Hood’s plan.
“In my view, the overdraft fee practices of some federal credit unions are fundamentally detrimental to members and inconsistent with the definition of ‘federal credit union’ in the Federal Credit Union Act: ‘a cooperative association organized . . . for the purpose of promoting thrift among its members and creating a source of credit for provident or productive purposes,’” Harper said.