The Consumer Financial Protection Bureau yesterday issued a Notice of Proposed Rulemaking that would prohibit banks and financial services companies from assessing non-sufficient funds fees on transactions that are declined in real time.
The Background: When a consumer tries to withdraw funds from an ATM or make a transaction for more than he or she has in their account, the transaction is quickly declined. There are limited instances, according to the CFPB, where consumers are charged NSF fees on those transactions.
- When a consumer initiates a transaction and doesn’t have enough money in his or her account to pay for it, one of two things generally happens. Either the institution extends credit, in the form of overdraft, to cover the purchase, or the transaction is declined.
- Allowing financial institutions to assess fees on these types of transactions will constitute an abusive practice under the Consumer Financial Protection Act, if the proposed rule is enacted. Regardless of the transaction method, financial institutions would be prohibited from charging NSF fees on all instantaneously declined transactions.
- Research from the CFPB has indicated that consumers who tend to be more financially vulnerable are more likely to face NSF charges, either on instantaneous transactions or other types of purchases. Among consumers who do not have a bank account, 30% of them cited concerns related to fees or minimum balance requirements as the reason why they do not have an account, according to the Federal Deposit Insurance Corp.
Why This Matters: This proposed rule is yet another attempt by the CFPB and other federal regulators to rid the world of what they consider to be “junk” fees. The CFPB has issued guidance and taken numerous steps to curtail banks and other financial services companies from assessing additional fees on products and services.
- This proposed rule is considered to be a proactive step to keep banks from getting the idea of charging fees when an instantaneous decline is issued on a transaction.
