We alerted you to a Proposal that will amend Regulations Z and E regarding overdraft fees for very large financial institutions (over $10 billion in assets). Today, we are alerting you to another Proposal that will prohibit financial institutions from charging NSF fees on transactions that are declined instantaneously or near-instantaneously. These are all part of the CFPB’s “war” on junk fees and we anticipate there will likely be more to come.
This latest proposal was issued on January 24th and, unlike the previous proposal, would apply to ALL financial institutions (as defined by Regulation E), regardless of asset size. These proposed changes will not amend any existing regulations but will add 12 CFR 1042 – Nonsufficient Funds Fees. This Section will clarify that non-compliance would constitute an abusive practice under the Consumer Financial Protection Act’s prohibition on unfair, deceptive, or abusive acts or practices (aka UDAAP).
When a consumer attempts to initiate a withdrawal from their account in which there are insufficient funds, some financial institutions have the ability to decline that transaction right away and may, in some cases, charge an NSF fee. The Proposal seeks to eliminate that practice for certain electronic transactions (some debit card, ATM, P2P, etc.). Transactions such as checks and ACH transactions would not be covered. Again, this would apply to instantaneous or near-instantaneous declines and not those that occur hours or days after the consumer’s attempt.
Comments are due on or before March 25, 2024.
Published
2024/02/09
