Bank in January, the CFPB issued a Proposal that was intended to rein in excessive overdraft fees and would amend both Regulations E (Electronic Funds Transfers) and Regulation Z (Truth in Lending) but would only apply to “very large financial institutions”. A very large financial institution would be one with assets of more than $10 billion. While the comment period has ended, this is something to keep on your radar.
As written, the proposal would still allow courtesy overdrafts (those not subject to Regulation Z); however, any fee would need to be a “benchmark fee” (predetermined by the CFPB) or based on a “breakeven standard”. Anything beyond these amounts would be subject to credit protections. For instance, “covered overdraft credit” would require a consumer to receive certain loan disclosures as prescribed by Regulation Z. Additionally, any covered overdraft credit accessed by a debit card or other routing/checking account numbers would be subject to Regulation Z’s credit card protections. This would include such things as determining a consumers’ ability to repay and the option to repay manually versus automatic payments.
The CFPB’s Fact Sheet gave a good overview of how we got here, but note it does include an error. The Fact Sheet states this applies to institutions with assets of $10 billion or more; however, the proposed regulation clearly states over $10 billion.
Published
2024/04/30
