CFPB Proposed Prohibition on NSF Fees

In case you missed it, the CFPB issued a Proposal back in January that will prohibit financial institutions from charging NSF fees on transactions that are declined instantaneously or near-instantaneously. While the comment period has ended, you will need to be on the lookout for when a Final Rule is issued.

This Proposal was part of the CFPBs ongoing “war” on junk fees and would apply to ALL financial institutions (as defined by Regulation E), regardless of asset size. The proposed changes would not amend any existing regulations but would add a 12 CFR 1042 – Nonsufficient Funds Fees. This Section would 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 wanted to eliminate this 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.

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Amy Kudlacek

Amy brings many years of banking and compliance experience to Banker’s Compliance Consulting. She has worked for both large and small financial institutions and spent time working in every area of a bank. She started out as a teller in college and eventually became a branch manager. Her love, however, was always compliance. Amy began her career with Banker’s Compliance Consulting in 2000. Her knowledge and experiences have allowed her to develop a well-rounded and practical approach to regulatory compliance. Amy is CRCM certified, has a Bachelors Degree in Business Administration and is a graduate of the ABA Compliance School. Amy & her husband have two children at home and stay busy following their activities. They spend a lot of time in the bleachers!

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