The Consumer Financial Protection Bureau (CFPB) today unveiled new Know Before You Owe overdraft disclosure prototypes designed to improve the model form that banks and credit unions already provide to consumers weighing overdraft coverage.

The CFPB is currently testing four prototypes that each have a simple, one-page design aimed at making the costs and risks of opting in to overdraft coverage easier to understand and evaluate. People who frequently attempt to overdraw their checking accounts typically pay almost $450 more in fees if they opted in to debit card and ATM overdraft coverage, according to a new CFPB study published today.

The study found that most of these frequent overdrafters are financially vulnerable, with lower daily balances and lower credit scores than people who do not overdraft as often.

“Our study shows that financially vulnerable consumers who opt in to overdraft risk incurring a rash of fees when using their debit card or an ATM,” CFPB Director Richard Cordray said in a statement. “Our new Know Before You Owe overdraft disclosure prototypes are designed to help consumers better understand the consequences of the opt-in decision.”

Today’s CFPB study spotlights frequent overdrafters — consumers who attempted to overdraw their accounts more than 10 times in a 12-month period. The study found that 9 percent of accounts are frequent overdrafters and they incurred 79 percent of overdraft fees. Today’s study is based on data from several large banks that together account for well over 40 million consumer checking accounts. Key findings include:

• Opted-in frequent overdrafters typically pay almost $450 more in fees: The typical opted-in frequent overdrafter has 22 overdrafts compared to 18 for frequent overdrafters who are not opted in.
• Frequent overdrafters carry low daily balances: The typical frequent overdrafter has an average end-of-day balance of less than $350. The typical non-overdrafter has an average end-of-day balance of more than $1,550.
• Frequent overdrafters have low or no credit scores: Consumers who overdraft frequently have median credit scores of less than 600, well below what is considered to be a subprime score.
• Frequent overdrafters use debit cards six times more often per month:  Median debit card usage — measured as the number of transactions per month — is highest among frequent overdrafters and lowest among non-overdrafters. The typical frequent overdrafter uses their debit card at least 25 times per month, which is six times more often than the typical non-overdrafter.