CFPB Proposes to Ban NSF Fees on Transactions Denied in Real Time

The CFPB contends they are 'junk fees'

The Consumer Financial Protection Bureau on Wednesday proposed to ban credit unions and banks from imposing non-sufficient funds fees (NSF) on transactions that they deny in real time. The proposal would include declined debit card purchases and ATM withdrawals, as well as some declined peer-to-peer purchases.

Agency officials conceded that most financial institutions do not charge such fees, but said they wanted to make it clear that such charges would be considered unfair, deceptive or abusive acts or practices if they were imposed.

“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,” the CFPB said. “Specifically, as technology advances, financial institutions may be able to decline more transactions right at the swipe, tap, or click.”

CFPB Director Rohit Chopra said the agency was proposing the rule to warn financial institutions that they should not begin charging such fees.

“Over the years, large banks and their consultants have concocted new junk fees for fake services that cost almost nothing to deliver,” said CFPB Director Rohit Chopra. “Banks should be competing to provide better products at lower costs, not innovating to impose extra fees for no value.”

The CFPB, with the support of the Biden Administration, has proposed eliminating what the agency calls “junk fees.” The agency has issued a proposed rule limiting overdraft fees for large credit unions and banks. The agency is widely expected to issue a final rule imposing limits on credit card late fees soon.

“The CFPB will continue to rid the market of junk fees today and prevent new junk fees from emerging in the future,” Chopra said.

Jim Nussle, president/CEO of America’s Credit Unions accused the CFPB of regulatory over-reach.

“The CFPB is once again stretching its UDAAP [Unfair, Deceptive or Abusive Acts or Practices] authority beyond congressional intent and is trying to publicize an uncommon practice under the guise of yet another misleading ‘junk fees’ proposal that will ultimately fester resentment between the consumer and their financial institution,” he said.

Rob Nichols, president/CEO of the American Bankers Association agreed, commenting, “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. As an independent regulator, the bureau should leave politics to the campaign trail.”

But a progressive consumer group applauded the proposed rule.

“When it comes to high-cost surprise junk fees that big banks love to charge, non-sufficient fund fees are perhaps the most greedy— punishing consumers for something they didn’t even purchase,” said Liz Zelnick, director of the Economic Security & Corporate Power Program at Accountable.US.