RSSThe Consumer Financial Protection Bureau is proposing banning financial institutions from charging non-sufficient funds fees for transactions declined in real-time.
The ban would cover debit card purchases, ATM withdrawals and some peer-to-peer payments. According to the CFPB, charging NSF fees for transactions declined instantly is unlawful under the Consumer Financial Protection Act.
Despite the proposal, the CFPB acknowledged that financial institutions “almost never charge fees” for transactions that are instantly declined. Banks generally only charge NSF fees on transactions that are processed and then declined — checks or electronic authorizations such as Automated Clearing House transactions.
The bureau issued a March 25 deadline for public comment on the proposal. “The CFPB is taking proactive steps to ensure that financial institutions do not impose these fees, which can occur for a host of reasons that are out of the consumer’s control,” according to the bureau. “Specifically, as technology advances, financial institutions may be able to decline more transactions right at the swipe, tap, or click.”
The Independent Community Bankers of America criticized the plan, saying it would have a negative impact on customers and businesses. The ICBA also renewed its call for the bureau to undertake a Small Business Regulatory Enforcement Fairness Act review before continuing with the rulemaking.
ABA President and CEO Rob Nichols questioned the logic behind the proposal. “Today’s CFPB press release conjures up a bank fee that the bureau itself concedes few — if any — banks charge and proposes a rule to prevent banks from charging this mysterious fee in the future,” he said. “As an independent regulator, the bureau should leave politics to the campaign trail.”
The plan was released one week after the CFPB announced a proposed overhaul of how banks and credit unions with more than $10 billion in assets determine overdraft expenses. According to the Jan. 17 proposal, banks and credit unions would have two ways to determine costs: One would allow financial institutions to calculate their own overdraft expenses and losses using the CFPB’s proposed standards, while the second would use benchmark fee rates set by the bureau — $3, $6, $7 or $14.
The CFPB also proposed banning the mandatory use of preauthorized electronic fund transfers to repay transactions paid into overdrafts by institutions that charge overdraft fees higher than a designated threshold.
